Franchising offers a structured approach to establishing and running a business. It’s well-documented and statistically proven that franchising reduces the risk associated with being in business. Franchise businesses generally have a high success rate compared to independent businesses.
However, not all franchise businesses within the same brand experience the same level of success. This disparity can often be attributed to varying locations, markets, competitive sets, and economic conditions. Yet what happens when the same location or territory is operated by different franchisees with vastly different outcomes?
Many franchisors can recount instances where a well-performing business either excelled or declined significantly under new ownership. The franchisee is a crucial component of the three-legged stool of franchise success. In fact, research indicates that the franchisee factor is the single largest contributor to success.
If you’re considering becoming a franchisee, there are three essential questions you need to answer to determine if a particular opportunity is right for you.
Essentially, you need to assess how you measure up in three critical areas.
Is the brand the right opportunity for me?
There are numerous questions within this category. Start by asking yourself if you can envision yourself as part of the brand. Do you understand what is expected of you and what successful franchisees in the brand do on a day-to-day basis? Would you be happy performing these tasks every day?
It’s crucial to understand what success looks like within the brand. What kind of money are successful franchisees making, and is this in line with your expectations?
Like any relationship, a misalignment of expectations cannot be overlooked and will ultimately lead to dissatisfaction and failure.
Can I learn and implement the required skills?
Every business demands a specific set of skills, whether it’s making coffee, building a fence, or discussing finance options with a potential client. You need to take a realistic and honest look at yourself and ask, “can I learn those skills?”
Maybe you already possess the technical skills and see a franchise as a way to utilise those skills and build a business. This can be a path to success, but it also presents challenges. One critical aspect is being coachable. Can you accept guidance from the franchisor and their team? Can you work within the system?
Many technically skilled people, who should theoretically succeed within a franchise, do not because the brand isn’t the right fit for them, or they are unable to be coached and work within the system.
Can I fund the franchise?
Finally, and perhaps most obviously, you need to consider if you can fund the franchise. This question is often not fully thought through.
Instead of merely asking, “Can I fund the setup and purchase?”, you need to consider two additional questions: “What is the range of time I can expect to reach cash-positive or break-even status?”, and, “Can I sustain or fund myself during this period?”
These are crucial considerations that will determine your financial viability within the franchise.
Franchising offers a promising path for many aspiring business owners, but success is not guaranteed. By carefully evaluating the brand, your ability to learn and implement required skills, and your financial preparedness, you can better position yourself for success within a franchise system.
The franchisee’s role is pivotal, and understanding and preparing for these critical areas can make the difference between success and failure.
Related: Franchise business: highly fundable
