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Franchise for Sale – Look Before You Leap

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In the early days of franchising, buying a franchise could be thought of as a safe and profitable method of entering the world of business, at least for those had a passion for business and understood what it took to succeed. Today, franchisor offer a franchise for sale, a person assumes it is a proven model of a successful business and will lead to success for them. However, that is not always the case. Your success with that particular franchise has a lot to do with you — not just the franchisor.

Buying a Franchise – Some Considerations

Franchisors make money from the sale of a franchise – it’s what they do. They have a product, a franchise business model, that they want to “rent” to you. Remember, you never really own a franchise, only the right to operate the business.

You need to find out how the franchisor makes their money before you consider buying a particular franchise. Some make it by selling you merchandise which you sell at a profit, some make it from your initial investment, some from equipment sales and on and on. Find out how they make their money and how it will affect your profits from the franchise. Also consider the following:

• Can You Follow the Rules? — Once purchasing a franchise for sale, you are under a contract. The franchise operates the same from town to town, city to city, state to state. For example, if you own a restaurant franchise, you may not like where the drink dispenser sits. Sorry, you’re stuck with it. If you want a better restroom tissue, cheaper straws, fewer lights — tough luck. The public expects the same from franchise to franchise and that’s what is expected from you.

• What About Your Profits? — Once the upfront costs of a franchise for sale are understood, what are the ongoing costs and how do they eat into your profits? Is there an advertising pool to which you must contribute? Do they get a monthly or annual fee from your franchise or is it a percentage of sales? What will be your total operating costs? Now here’s the key question, what will be your average profits after expenses per month?

• Is The Family On Board? — Few franchises start off with a bang and continue in the same manner. You will have to build the business. That may mean you’re washing windows and mopping the floor at midnight. Junior’s soccer career may have to leave you out. Get someone going to the games to take notes, video or draw pictures with crayon. Until profits allow you to hire staff or services to swish out the toilet, you may be the only member of your maintenance staff. Make sure all family members support your decision without conditions or you’ll have serious conflicts.

• What’s Your Commitment Level? — Make sure you have a passion going into your franchise ownership. Passion will boost your commitment. Know that you’ll eventually get out of the business what you have put into it. Be disciplined in your approach and love what you’re doing.

• Where’s the Money? — Have you noticed there’s been a global recession? What if it were to get even worse. Would you have the funds to keep the business going? For how long? A franchise is not a guarantee of a good, steady income. Make sure at the outset you have adequate capital to sustain the business for one to two years — just in case. Also, look for a franchise that succeeds even when times get tough.

If you decided to buy a franchise, give it all you have. You will likely need to work harder than you expected because most do. If you fail, don’t blame the franchisor because at the end of the day, it was your decision. No one put a gun to your head and said buy this franchise. Do your homework and make sure you find a franchise that is a good fit for you. With a lot of hard work and a little luck, you may be viewed as the luckiest guy in your neighborhood. Of course we all know that luck is only found at the intersection of opportunity and hard work.

Dion Earnshaw is a Candaian Author. He provides help introduce prospective franchisees to franchisors, helping both to achieve higher levels of success. He has applied his knowledge and understanding to a wide variety of franchise for sale.


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  • Posted On August 1, 2012
  • Published articles 5

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