There are two aspects to choosing a franchise to invest in that matter: potential for success and corporate culture.
Both factors matter to prospective franchisees, but for vastly different reasons. Working in a franchise, crafting a franchise, you have the potential for success, but you must fit the right mold.
Analyzing financial success for a franchise opportunity
Franchise opportunities do not come from nowhere. Often a franchise may be actively searching in an area for a partner – and they have done their research. In a situation where you find yourself courted by a franchisor, your job as an investor is simple: listen and verify. Explore the materials you are given and check up on figures with your financial advisors and attorney.
The more likely scenario, however, will require you to do the heavy lifting. You must recognize a franchise’s strengths and how they apply to your local market. That can be easier said than done. It all comes down to research, which may require the input of professionals familiar with the legal landscape and the commercial market in your chosen territory.
Analyzing corporate fit
As a franchisee, you are your boss. You own the operating business. You bear the risk and can reap the rewards.
However, you are also part of a larger corporate structure. The way you approach hiring, marketing and sales must conform with the larger franchise structure. While some franchises have somewhat freer rules regarding such things, there is no single corporate or personal approach to this question.
While researching the financial side of things, you will expose yourself to the culture. Only then can you make an honest judgment.
If it is a fit, you still have work to do
Once you know which franchise you’d like to invest in, are confident of its chances for success in your market, and know you will have to take the next step: attracting and convincing them to work with you. It can be simple or difficult, depending on the franchise. However, your time investing in diligence and relationship can pay off for you.
Next, we will look more closely at the process of opening a franchise and common fee structures.
Read part 1: An introduction to franchises
Read part 3: Fee structures and opening
Read part 4: The long-term outlook