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How to evaluate a franchise opportunity

On Behalf of | Oct 9, 2020 | Franchise Law |

Franchises are a tried and tested way to start a profitable business. When starting a business from scratch, you’ll need to conduct thorough market research, create a brand strategy, set up sourcing and essentially adopt a trial and error approach to many aspects of the business. The benefit of a franchise is that all of the groundwork has already been conducted – the business idea works, and it can be theoretically replicated in different locations with the same profit margins.

While franchises can present enormous opportunities, they are not foolproof, and you should always conduct due diligence before making a commitment. The following are key considerations to make before becoming a franchisee.

Will this franchise work for your defined market?

While the franchise owners may have seen huge amounts of success in their markets, you cannot assume that starting a franchise in a different location will be equally as profitable. Make sure that you understand the differences in customer demographics within the market that you want to set up in and question viability from many different standpoints.

What is the level of investment?

You’ll need to invest a certain amount before becoming a franchisee. You’ll need to have enough liquid capital to make the franchise a success in the short term, otherwise, you’ll be prone to failure.

What training and support is available?

Make sure that you are getting enough from the franchise in order for it to be worth your while. You should be comfortable that you’ll be trained by the owners and that you’ll be able to learn from their experiences.

What is the exit strategy?

Always make sure you’ll be able to quit if things don’t go to plan. Make sure you know what the procedure will be in the event that you become sick or have a personal crisis.

If you are considering committing to a franchise instead of setting up a business from scratch, it is important that you have a full understanding of the law so that you are protected financially.