When it comes to franchising it’s important that you take the time to do your due diligence so that you can make an informed decision as to whether or not franchising is right for you. There is a lot of money at stake, don’t skip this step, it will affect you for years to come if you get it wrong!
Read my previous posts on the advantages of buying a franchise and the Big one: The Disadvantages of buying a franchise. This articles is a good summary what to look out for when you’re still trying to decide.
Here are some questions you should take some time to address when it comes to buying into a franchise:
1. How big is your investment and how long will it take you to repay it?
Thinking about the upfront costs of a fingerprint jewelry franchise should be your first consideration. Repayments need to be taken into account when you work out your budget, they will be increasing your costs of operation for many years to come.
2. What are you getting?
Tools & Equipment – make sure that the franchisor tells you exactly what tools and equipment you will be provided with and any that you may have to purchase on your own. Ask also if you are going to be required to buy new equipment later on, this can happen when they introduce and start marketing a new line which you’ll be required to supply too. In some food franchises people are constantly required to buy new equipment (only available through the franchisor) dragging down their bottom line! Training – You should find out if you’ll be trained by the franchisor or if training will be your own responsibility.
- Advertising & Marketing – again, talk to the franchisor and find out what type of advertising and marketing will be done for you.
- Will you be required to pay extra for campaigns set up by the franchisor?
- Is there a ceiling to these costs? Remember that if an expensive TV campaign is started your costs could blow out, without you having any control.
- If no advertising or promotion is done for you, will you be provided with any ready-made materials – ads, flyers, etc?
3. What are your ongoing costs and commitments?
As with any business, there are costs involved in running your franchise. It’s your responsibility to make sure you know about the following financial costs on an ongoing basis:
- Royalties – this is typically a percentage of your gross sales (but sometimes can be a fixed rate) that are paid to your franchisor on a regular basis. Before you sign any agreement, make sure you find out whether these royalties will be a percentage based on your sales or a fixed amount.
- Advertising fees – will there be extra fees involved in advertising your franchise or will that be taken care of by your franchisor?
- Training fees – again, same as the advertising fees, will you be responsible to cover any fees for training on learning technique, software etc. or will the franchisor cover this?
- Inventory – there will be ongoing costs to cover for any inventory your franchise needs to have in stock. For a fingerprint business this is usually not a high cost, but make sure you have all the answers, just the same.Please note: these fees are just an idea of what you could have to pay, not all of them are fees that every franchise owner would have to pay, other than royalties, which are a normal fee for all franchisees. Another important thing worth mentioning here is that you should take time to meet with an accountant and listen to their recommendations – they would have seen many franchise businesses before, maybe have some of them as permanent clients, they know what goes on behind the scenes and if people are successful, listen to their advise, they know what they’re doing!
4. What are your ongoing responsibilities?
Another thing you should discuss with the franchisor is what your responsibilities will be on an ongoing basis. While this will vary from franchise to franchise, there are responsibilities that will probably be normal, as a franchisee, to deal with such as making sure your business is kept up to the franchisors standard in the areas of marketing and advertising, business hours, pricing and operational methods, just to name a few.
5. What are your restrictions?
One of the biggest downfalls to franchising is the restrictions that are placed on what you are allowed to do. You’re being sold a business model that is known to be successful and in exchange for that, you’re required to follow the franchisor’s rules and regulations. If you don’t, you risk losing your franchise so be sure you talk in great detail about the things you can and can’t do upfront before you sign anything. Look into:
- The area you are allowed to work locally.
- Are you allowed to sell online? This often infringes on other franchisee’s areas and will not be allowed. This could mean a lot of lost opportunities for you, many Fingerprint artists sell extremely well online, from their own web site, through Facebook and other social media as well.
- Are there any other restrictions, such as the items you are allowed to sell?
You will nearly always be restricted to the franchisor’s collection and they will generally not allow you to add your own designs. This means you won’t be able to hook into a new trend you might have noticed, ahead of your competition, potentially losing you a lot of income along the way. For creative, on the ball people, this can be a deal breaker.
Two more things worth mentioning before you commit to buying any franchise:
- Get some feedback from other franchise owners. Take the time to reach out to them and find out what they have to say – the good and the bad! This will help you get a feel for how well the franchisor takes care of its franchisees.
- How well known is the franchise by the general public? Is the name worth paying such a lot of money for, or could you easily establish your own name in time, locally and online?
In closing, the best way to make a decision about franchising is to take plenty of time to equip yourself with knowledge. If you take the time to do your due diligence and think about the things mentioned in this article, you’ll be well on your way to have yourself and your family covered to make that decision. Of course there is the best alternative: Setting up your own business from scratch, (read more about that here) it may require a little more work and time, but in the long run you’ll be in control, not someone else!