When thinking about self-employment, there’s little reason for anything other than a planned and sometimes cautious approach, David Banfield, president of the interface financial group, advises
If your flight has been called and you are not yet at the gate, there may be good reason to make a spirited dash to the departure area.
There may be many examples where there is a valid reason to rush through things to get to the end. However, when thinking about self employment and entrepreneurship, there is little reason for anything other than a planned and sometimes cautious approach. There are many variables to consider and each one needs appropriate time and research. If franchising is the preferred route into owning one’s own business, then timely research is still the order of the day.
Due diligence
The franchise marketplace has literally thousands of opportunities, but the good news is you can invariably gather a wealth of readily available information to enable you to complete the appropriate due diligence exercise.
Pursuing a franchise opportunity is, for most people, life changing. Many would-be franchisees have been in corporate employment - often for many years - and investing in a franchise might, for some, seem like stepping into the unknown.
There should be no hurry - the franchise will not take off without you. As you work through the process there are many aspects to consider, review and research. Each aspect demands thorough investigation to ensure you are not flying blind, but have all the appropriate data.
Some of the specific areas you need to review include the type of franchise, location, structure, and your own legal framework.
In reviewing the type of franchise to pursue, most people have a fairly set idea of what they would like to do. Often many, perhaps inappropriately, think they can turn their hobby into a business and that business already fits an established franchise category. While on the face of it this makes sense, turning something you enjoy into a business may not work for you or the franchisor.
A franchise is a tried and proven system. Turning a hobby into a franchise invariably means doing the thing you like to do in a completely different manner and time frame. With a franchise format, what you did as a hobby becomes a business designed to operate during regular hours and make a profit.
Franchise location is something to explore with the franchisor. Most, but not all, franchises come with a fixed territory. Your first question should be: Is there a territory available in my immediate area? If not, is relocation an option?
The franchise review process now takes on an additional dimension as you start to consider the ramifications of relocation of not just yourself, but also your family. The cost of that relocation must also be factored into the overall cost of the new operation. Will it now take longer to reach the break-even point?
When examining franchises, you will realise there are numerous business models to consider. Some franchises are territory dependent, others require premises and many need staff and specialised equipment.
The formal franchise structure will also vary in terms of financial requirements. Some will require a fixed amount of capital and expenditure and in some cases franchisors offer financing packages or arrange them on behalf of their prospective franchisees.
Some franchises require a one-time franchise fee and then the franchise is royalty free. Such an arrangement usually requires the franchisee to acquire products or services exclusively from the franchisor at the franchisor’s stated price level.
Plan ahead
As you start to look at various franchises, you may become overwhelmed at the variety and complexity of the individual models. Prepare a basic plan ahead of time, so that you are not easily distracted from your main line of enquiry.
As already stated, when looking at making a franchise investment, there is usually a wealth of information available to you from the franchisor - take full advantage of what is offered.
Franchising is a well established approach to business ownership and can smooth the investigation process, but it cannot eliminate it. Your goal is to end up running a franchise in which you are comfortable and where you can see the profitability of the business over an appropriate time span.
Getting to the bottom line is not something that should be hurried. You can’t buy a franchise off the shelf, even if it is a proven brand. Thorough research is the prime requirement to ensure you end up with the right choice of business. MM
