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15 Factors to Consider Before Buying a Franchise

Franchising is considered as a viable option for entrepreneurs who are looking to foray into the business world.

By Features Writer
15 Factors to Consider Before Buying a Franchise

In India, the franchising business was worth Rs 938 billion in 2012. It reached Rs 3,570 billion in 2017, increasing at a compound annual growth rate (CAGR) of 31%. The franchising market is projected to reach Rs 10,500 billion by 2022, growing at a CAGR of 24%.

Seeing this potential of the franchise sector, franchising is considered as a viable option for entrepreneurs who are looking to foray into the business world.

So, if you are looking to opt for the franchise business, then there is a franchise process wherein you should do as much research as you need to before you feel comfortable in taking the step to become a franchisee.

Here are some of the factors you should consider before buying a franchise:

Understand your budget

You need to know your budget before entering into franchising. You will be required to pay for the location, the staff, the material, and other necessary things. Therefore, it is important to understand your budget carefully and then look for companies that match your criteria.

Research your market

When you are looking to begin a business, it is important to understand the market and its demands. You need to know the requirements, the different brands, and then decide what you want to opt for. Never ever rush into a business without proper research.

Inquire about brands

You need to inquire about the company which you are investing in. You need to compare franchise opportunities with one another as there are various brands in the market that are open for franchising. Look what are the benefits and support systems you are getting from a company and compare them with other brands.

Attend Discovery Days

Attend a lot of discovery days. There are companies who do discovery days wherein they elaborate on what is it that they would be looking forward to give to franchisees. Here you get a chance to ask numerous questions about the business. You will also learn exactly what it takes to be successful in the franchisor’s system. 

Franchisor research

Once you decide to go with some particular company, it is your duty to conduct thorough research about the franchisor. It is important to understand their business model and know their track record before investing your hard-earned money into it.

Demand for the product

If you just like the product that the franchisor is offering then buying a franchise isn’t a good business decision for you. You need to research your target audience and see what the demand for that particular product is in your selected location. You need to see who will buy your products.

Research competition

Find out more about your competitors. If your selected region has many businesses offering a similar product, then you may need to reconsider your choices of investing in that particular franchise. This is because you may not be able to capitalise on the consumer base to its fullest. Before selecting the right franchise, it is a crucial thing to compare different franchise brands and their competitors.

Build your business plan

You need to build your business plan in order to smoothly run a business and evaluate your options. It will also help you in discovering any weaknesses in your business idea so that you can address them beforehand.

Cash flow projections

Cash flow forecasting is really important because if a business runs out of cash and is not able to obtain new finance, it will become insolvent.

Manpower

See how much manpower is needed for starting a business. It will help you calculate your expenses and manage your budget.

Training and support

You need to understand the training and support system that has been led down by the company. Franchisors train you according to the company's demand by providing full support. The companies that provide training and support at every step are the best ones to take franchisee of.

Franchise fees and royalties

Carefully look at how much franchise fees and royalties the brand is charging. A royalty payment is usually made monthly or quarterly. The most successful franchisors take great care in determining what their required royalty fees will be.

Growth opportunities

You need to see a long-term growth plan from something that you are getting into. Before investing huge money in buying a franchise, you need to look into the future prospects of the brand and what is the potential it holds in the near future.

Financials

You need to analyse and assess the risk involved in it. Every business has a risk but it’s good to assess it first so that you can be prepared for the hard times.

Restrictions

Once you have taken up a franchise, there are certain rules and regulations that you have to follow. Franchisor offers the guidelines that are made with prior experience and expectations which the franchisee has to follow. 

You should definitely consider these pointers before buying a franchise. They will help you in evaluating your options and make you successful in the longer run.

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