How to Choose the Right Franchise Opportunity

If you like the idea of being self-employed but also entering the marketplace with an established business, then a franchise could be the right opportunity for you. What is the best franchise to own? There is a lot to learn before taking the leap into the franchising world. Your investment level, experience and interests will all play a role in determining which franchise you should buy.  Here are some things to consider when choosing the franchise best for you.

Determine How Much You Can Invest

The first step in the franchise buying process is getting a sense of what you can afford to invest in. There are a variety of options to secure capital if you need to but you should do your research to find the best path for you and your financial stability.

While determining how much you can invest might prove a little difficult before zeroing in on a specific franchise opportunity, there are steps you can take to provide some guidance. Sit down with your local bank and review your assets to see how they could assist in a home equity or Small Business Administration (SBA) loan. An SBA loan is a common tool many franchisees use to open their first location. If you have a 401k, a Rollover for Business Startups (ROBS) loan is another means to explore. This is a specialized type of loan that allows you to use your 401k money penalty free. If you sense that you may be light on funds, approach friends and family to seek financing. Make sure you are comfortable working with whomever you approach. Rest assured, they will be a partner. Even “silent” partners have tendencies to be quite vocal.

Lastly, bring up the topic of financing with every franchisor you speak with. They may have strong relationships with certain lenders that will make it easier for you to obtain financing. They may also offer in-house financing.

Understand the Profitability Timeline 

Do you remember the line from the movie Field of Dreams, “If you build it, they will come?” That may work for the ghosts of the 1919 White Sox but to be successful in franchising, it takes more than just opening your doors. Before you throw yourself into owning a franchise, understand how much time it will take to see a profit. While it certainly would be nice to become profitable overnight, that just isn’t realistic.

Check with the franchisees of the brands you are interested in purchasing a franchise from to find out how long it takes to typically start turning a profit. Then determine if you have adequate operating capital to see you through that period. The last thing you want to do is to invest all of your money in your dream business only to have to get out before you realize any success. Knowing what the timeline to profitability is will also help you decide which brand you should partner with

Consider Your Experience and Interests

Some eager future business owners with the necessary capital and drive never consider their skills, experience or interests. To have a successful franchise business, it’s important that you are well-suited to making it work. For example, if you have worked in a food service industry for several years and know all the ins and outs, a fast food or restaurant franchise would be a great fit. Having industry knowledge and experience will set you up for success.

Also, when considering franchise ideas, think about your personal hobbies and interests. Do you love to work on cars? Maybe an auto parts franchise is right for you. Or maybe you love animals. Then a mobile pet grooming business may be a great idea.  No matter what you enjoy, there is a franchise opportunity to match almost every interest.

Match Your Interest with A Growing Industry

After evaluating your experience and interests, try to match those with a growing industry.  Buying a video rental franchise in 2012, for instance, meant ignoring all the trends pointing to the demise of video rental and the rise of online movie streaming. Approach each franchisor you speak with about market trends. Ask them where they see the industry in five or ten years, and ask for statistics to back up their claim.

Don’t shy away from crowded markets. The tendency for many is to invest in an industry that appears poised for growth.  Don’t confuse that with an industry that is now and will always be unpopular. Even sectors such as pizza continue to see new concepts enter the market and thrive.

Choose the Right Franchisor

While having passion and experience are essential, they may not matter much if you partner up with the wrong franchisor. It’s paramount to align yourself with a franchisor who offers extensive training and support, as well as to surround yourself with team members who possess the necessary skills and experience.

Buying a franchise is a serious investment. When you sit down to talk with a potential franchisor, treat it like a job interview and have a series of questions prepared for them to answer. Taking this time will pay out in the end.

All franchise and business opportunities have the possibility of being successful or failing. What will make or break your business is you – the franchise owner – and your ability to overcome obstacles that present themselves along the way. Buying a franchise is a big commitment that requires hard work and dedication. The most successful franchise owners are those who truly enjoy their business and don’t mind dedicating the time necessary to make it a success.

Eric Bell has 15 years of franchise industry experience and currently serves as General Manager of Franchise Gator. He began his career in 2002 as a Hollywood Tans franchisee in Atlanta where he also served as area manager and helped develop the Atlanta territory.  In October 2005, Eric joined Franchise Gator as a sales representative and went on to hold several positions including sales manager and director of sales and service.  Eric is a member of the Southeast Franchise Forum and is a Certified Franchise Executive. Follow Franchise Gator on Twitter @franchisegator and Facebook.