Are you dreaming of investing in a restaurant franchise?
While this idea seems enticing, you have to know that this is a risky investment. Although less complex as starting your own business, franchising comes with its own challenges as well. So if you are looking into opportunities to franchise a restaurant or QSR, we have some helpful tips for you to help achieve success.
1. Learn more about the franchisor and the franchise operation
Before investing in anything, it is important to get to know the franchisor and the operational procedures that they have. While you’re at it, you should also look into rules, restrictions, and franchise disclosure documents (FDD) that your franchisor has. It is important to study, assess, and build a good relationship with your franchisor to maximize the franchising experience. However, it’s more important that you are comfortable with the arrangement before diving into this risky opportunity.
2. Assess the company’s track record and projected overall return on investment
It goes without saying that you will have to shell out a hefty amount of money to start a franchise, so do not feel guilty about openly discussing financial trajectory of your current project. Furthermore, it is important to study these tracks to make sure that you are making a sound investment. After all, the very goal of making this risk is to earn back what you have spent and more.
3. Interview former and current franchise operators
Just like how you ask for references before you hire people, the very idea is to get a good grip of the entire franchising experience. It’s best to interview at least one former and one current franchise operator about how the franchisor manages their franchise. While the experience might vary depending on the individual, asking these operators can give you a pretty good idea of what to expect in the future.
4. Study the long-term potential of the franchise and the company
More than the financial track of the company, it is crucial that you assess the growth opportunities of the franchise and the company. This, of course, includes studying the products offered, the growth trajectory, and the long-term viability of the company. Do not hesitate to discuss this with your franchisor as well. This gives an impression that you’re in it for the long run.
5. Conduct a feasibility study
Usually, franchising means going in uncharted waters. There is no denying that most franchises are made in places that were beyond the scope of the founding company’s target market. Therefore, it is only logical that you assess and study the market where you want to build your franchise. Target market, demands, location, and competition are key factors that you have to highlight in this assessment.
6. Say no to financial assistance
This might be a strange idea to you especially since the program is designed to help people out during a financial crisis. However, you should understand that opting for financial assistance will put you at risk if your franchise fails. Before investing in a franchise, make sure that you have the means to actually do it. Furthermore, you should also have a financial backup plan during rough times.
Take note of these things before you make any investment, particularly when you decide to get into a franchise. When you educate yourself, you arm yourself to make wiser decisions, which will save you time, money and effort in the long run.