5 challenges for franchise ownership

There are many hurdles that someone interested in business needs to overcome.  Here are some typical hurdles that we see that you need to think about before exploring business ownership.


1.) Budget:

Perhaps the most common issue for not exploring or going into business for one’s self is an individual’s budget.  And this is not only for franchise businesses, but all businesses across the board.  Two things are in play here: (1) available or liquid capital that a person may have to invest, including cash, stocks, bonds and/or retirement savings.  Typically, FranNet recommends that someone interested in franchise ownership have about 25-30% of the “all-in” costs to buy a franchise in liquid capital.  The “all-in” costs include all start-up fees to get the business going — things like the franchise fee, new equipment, build-out, special vehicles, insurance, and working capital, for instance.  So a business with an all-in cost of $100,000, an individual would need about $25,000-30,000 to get their business open.

The other piece of the puzzle in play here is (2) the relatively tight credit market.  Lending is slowly coming back across the country, but lenders are still a little tight fisted.  What someone doesn’t have available in liquid capital needs to be borrowed.   The balance of the 70-75% of the “all-in” investment can be acquired through a lender, which are more likely to lend money to a new franchisee than a typical start-up business.


2.) Family Support

This is a hurdle that tends to be ignored until it’s too late.  We hear horror stories all the time of someone interested in buying into a franchise and they run home to tell their spouse about their interest.  The spouse doesn’t realize what’s involved and usually has one of two reactions: (1) “Sure honey, that’s great,” dismissing it as passive interest, or dismissing it as “that’ll never happen.”  Or (2) the spouse will respond harshly, “Absolutely not. It’s too expensive/too much time/too much effort/not a good idea (enter reason of choice).”

Either way, the spouse may be ill-informed of the opportunities and the challenges involved with buying into a franchise.  At FranNet, we strongly advise the spouse is included at all points throughout the exploration and recommend that both spouses attend all meetings concerning the potential new business.  Someone wouldn’t buy a house without their spouse being heavily involved – and they shouldn’t buy a business without their spouse/family heavily involved in the process.


3.) Seemingly unlimited options

There are a little over 3,100 different franchise concepts in just about every industry imaginable.  So where you do start?  Google, of course!  And you’ll become quickly overwhelmed when Google returns about 8 billion results when you search, “franchise business opportunities.”  The better option is to do a true evaluation of your skill set, goals, strengths, weaknesses and budget.  This will better help you define potential franchise options.  FranNet will walk you through an extensive proprietary evaluation — a personal franchise assessment — of those criteria, plus many others. The assessment looks at a person from many angles, including focusing on their behavior profile, risk tolerance and financial background.  These attributes are combined with what the company has learned in the marketplace over the 25 years it’s been in business to find an ideal business in which the client may succeed.


4.) Lack of Focus

This is really tied to #3 above.  A lack of focus comes from the incredible range of franchising options available.  Without professional guidance on which concepts make the most business and financial sense, someone could spend a lot of time spinning their wheels researching concepts that are not great fits with their skill set or goals.  This lack of focus tends to cause potential business owners to become fatigued by the process of finding a business.


5.) Nerves

We like to say, “If you’re not nervous, you haven’t done enough research.”  As with any decision of this magnitude, there should be some sense of anxiety simply due to the magnitude of the decision you’re making.  Anyone who doesn’t feel some nervousness probably hasn’t dug deeply enough to uncover all the potential potholes and all the potential questions.  An educated buyer is the best buyer, and FranNet provides all the necessary education to arm you with as much information as possible.  But at the end of the day, you have to make the call on which franchise system works best for you.  All of the information in the world isn’t going to make the decision for you.  Follow your gut instinct – it’s generally the best barometer.

About the author: Jania Bailey is President and COO of FranNet (www.frannet.com) and author of “Thriving – The Journey to Success in the Business World.”

Jenni Proctor

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