When it comes to investing in a franchise, many people will tell you it’s a numbers game. How much will you invest? What is the return on investment (ROI)? Cash flow? Break-even? These questions make sense because the numbers are important. It’s only natural that potential franchisees want to ensure they are joining a sustainable business model and will receive a respectable return on their investment if they have what it takes to be a franchise owner.
Having sound financial data to support your investment is critical, but there’s so much more to consider. Becoming a franchise owner is an endeavor that can have a profound effect on you, your life and your family. You need to know more than just the numbers before you make your investment.
In addition to knowing the financial information, it is important to understand the cultural, lifestyle, skill set and emotional requirements before investing in a franchise. This is why it is important to take a step back and conduct the proper due diligence before making a decision. With the proper guidance, you can know everything you need to make a fully informed choice with your franchise investment.
The prospect of opening a franchise is a thrilling time in the life of an entrepreneur. You are finally stepping out on your own on the road toward business ownership. It’s an exciting time, but it can also cloud your judgment. Consider how often you may have overlooked certain shortcomings in a major purchase because of your excitement.
Maybe you didn’t consider the poor mileage on the purchase of a new-to-you car. It could have been ignoring that leak in the roof or other minor defects when buying a home. The point is that when we want something to happen, it becomes easy for our brains to do the mental gymnastics to justify just about anything. There’s a saying that when you are looking at the world through rose-colored glasses, all the red flags just look like flags. That’s why you need someone in your corner to help you make an objective business and career decision.
Choosing to join a franchise is not the same as buying a house, car or corporate stock. As a franchisee, you’re choosing to become part of a franchise system. This means you must be comfortable with the corporate culture and the people who come with it. The culture of a business is just as important as the numbers. In fact, some would argue that it’s even more important. When you sign a franchise agreement, you’re making a long-term commitment to be part of the franchisee community, follow the business operating system, and play nice with your fellow franchisees and the franchisor. If you are going to set down roots like this, it’s crucial that you fit into the franchisor community and will be happy.
Prior to looking at specific franchise systems, it’s important to define why you want to get into a franchise business. Are you hoping to improve your work-life balance? Do you want to spend more time with your family? Perhaps you want to make a shift toward a more positive company culture.
One important practice I often recommend to people wanting to learn more about a franchise system is to speak to one of the current franchisees. Who would have better insight into the company’s culture than someone who is already in the system? I believe it is important to speak to several different types of owners to get a complete view of the franchise. For obvious reasons, you will want to talk to successful owners to learn how they have thrived. Speaking to other franchisees who may be looking to sell can also reveal potential red flags. Having conversations with longtime franchisees is helpful to understand the historical perspective on the system, while speaking to new franchisees can give insight on the training and support they have recently received.
The numbers are what they are. You can discover the estimated ROI, year-over-year profit margins and startup costs. What might be more difficult is to know if the franchise is the right fit.
A franchise is as much an emotional investment as it is a financial one. When you are laser-focused on the numbers, it can be easy to overlook the emotional wherewithal necessary to make the business a success.
Have you ever been on a date with someone who looked good on paper, but you turned out to be incompatible in person? The same rationale applies to franchising, only this involves a much bigger commitment on your part than a dinner date. This is why you need to perform your emotional due diligence with any franchise investment. When you navigate the process with someone who understands the journey, you will be in a better position to determine if your own skill set and attitude align with those of the company.
The path to franchise ownership can quickly become overwhelming. It is a major investment that will impact much of your life. The least you can do is make sure that you’ve been as thorough as possible in your research. That means looking at the numbers as well as the people and culture behind them. When you walk the path of business ownership with a proven franchise coach or someone else who can provide an external perspective, you can be confident that you’re armed with everything you need to know to make the right choice for yourself and your family.