Buying a franchise can be an excellent investment opportunity. Doing so will allow you to own and operate a business without a lot of the risk associated with startups due to the fact that you’ll have the support of an established brand. However, this doesn’t mean that franchises are a sure thing. In fact, there are a number of mistakes that investors often make when buying a franchise. The following are a few of the most common mistakes that you should avoid when shopping for a franchise:
1. Not caring about the product or service
You might be tempted to buy into a franchise that is growing rapidly and that has a proven track record. Who wouldn’t? But think about how you will feel selling the service or product that the franchise offers. If you can’t get behind the product or service that you’ll be offering, then you’re not going to get a lot of fulfillment out of running the franchise. You should invest in a franchise that won’t just be successful, but that will make you happy as well.
2. Buying a franchise that’s trendy
Just because a franchise is in the news due to a celebrity endorsement or because some new product or service has caught on with the public doesn’t mean that they are a good long-term investment. Don’t get caught up in the hype. Remember, franchises that explode over the course of a year due to a trend can result in a number of franchise failures because they stretched themselves too thin.
3. Not understanding your financial situation
Just because investing in a franchise isn’t as big of a financial risk as opening your own business doesn’t mean that there’s no financial risk involved. Take a very close look at your finances and at the costs of starting and operating the franchise. If you have major debts that you are still paying off and poor credit, then you should focus on getting rid of your debt and improving your credit before you think about investing in a franchise.
4. Not getting the full support of your family
Now only is buying a franchise a major financial decision, it’s going to require a lot of your attention to start and run effectively. You should expect to work more than the typical 40 hours a week in the first few years that you are running your new franchise – and your family needs to be okay with that or it could result in problems at home.
5. Not doing your due diligence
Do as much research as you can about the franchises you are looking at as well as their respective industries. Consider the history of the franchise, the support they provide, the cost of investing, the operation costs, whether there’s demand for the products or services in the area where you want to open your franchise and more. Be sure to speak with other franchise owners as well.
6. Not realizing that you won’t have a lot of leeway
Running a franchise is not like running your own company. While you’ll still be the boss, you’ll have to work within a system. There’s very little flexibility when it comes to how you operate your franchise and how you market it – and for good reason: most successful franchises are successful because they follow a tried and true business plan.
These are some of the biggest mistakes that investors often make buying a franchise. If you’re thinking about investing in a franchise and would like professional business financial advice, then be sure to contact us at Valezar & Associates today.