Factors to Consider When Choosing a Franchise

selecting a franchise

Your Guide to Franchise Ownership

There is an estimated 775,000 franchise establishments in the U.S., and that number continues to grow. Why? Because the franchise model works! By leveraging a proven system, support and training, you can step right into a franchise business much more seamlessly than starting from scratch. But you have to do your due diligence... and that's where the IFPG Franchise Buyer's Guide comes in.

By arming yourself with knowledge and information, you can be well on the way to a new path as a franchise business owner. We have you covered every step of the way!

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With Thousands of Franchising Opportunities to Choose from, Picking the Right One Can Be a Seemingly Impossible Task. Here's What You Should Know.

With thousands of franchises to choose from, picking the right one can be a seemingly impossible task. It is crucial to consider your interests, skills, and financial situation when deciding on a franchise, as all franchises require different skills and financial investments.

Factors to Consider When Choosing a Franchise Include:

  • The franchise should have a good sales record. The primary benefit of franchising is investing in a working system that has already seen success. The operating system should be replicable and proven.
  • The marketability of your product or service is key. Doing market research is a critical part of the due diligence process and will help you determine if the franchise is located in a prime market that will lend itself to business success. Also, invest in an industry that is expanding and gaining market share.
  • Look into the competition in your area. If the competition is low, it will benefit you, but be aware of market saturation. For example, if there is a fast-food restaurant around every corner in your market, consider investing in a non-food-related franchise.
  • Invest in a franchise that has a lot of repeat business. This will allow you to expand the business and become an essential part of the daily lives of those in your community.
  • You should be interested and invested in the franchise. Be sure that you are excited to endorse the product or service you are providing. If you don’t buy into what you are selling, nobody else will.
  • The franchise cost should be within your budget. Owning a franchise can be a costly endeavor. You will have to pay franchise fees, royalty fees, and more. To make the best investment for yourself and your family, you should look at franchising opportunities that are within your investment range.  
  • Do your due diligence and speak with franchisees in the system. Are they happy there? What are the culture and franchisee support like? Are they passionate about the franchise business? These are all questions to ask before buying a business.
  • Look into the franchise’s marketing initiatives. Depending on your franchise business, you may be responsible for local advertising. This is especially true if you’re not with a legacy brand, which will handle all of the marketing and advertising for you. Good marketing campaigns can help get customers to your franchise store or home-based business.

Another important factor to consider when choosing a franchise is the type of ownership model that you want.

Owner/Operator

With this kind of ownership, you are front and center doing the daily operations of the business. If you want to make a full commitment to the business and be in control of all its decisions, then this ownership type is for you. This type of ownership is also good for those looking to make a career change. 

Entrepreneurs who want to open a franchise can include veterans looking to disrupt an industry; corporate refugees who are sick and tired of the 9-5 grind; or single mothers looking to turn a side hustle into a franchise business. Owning a franchise is a viable option for many. 

Absentee Ownership

This type of ownership will give you an arm's-length control. It allows you to treat it as an investment and not a lifestyle change. While you own the business, you hire managers to deal with the daily operations. While this leads to higher labor costs, you can have more freedom and scalability.

Semi-Absentee Ownership

This is the best of both the owner/operator and absentee ownership models. With this ownership type, you have help with the daily operations while also having the time to have a day job and support the business financially. 

Many former professional athletes choose this form of ownership after they retire. Since they generally retire earlier than other professionals, owning a franchise allows star athletes to provide for themselves and their families once their playing days are over. While you certainly don’t have to be as rich as Shaq in order to become a franchise owner, absentee ownership will allow you to operate a franchise store while pursuing other business opportunities or spending more time with family.  

You also need to consider how many units you’d like to buy. You can choose:

Single-Unit Ownership

This is the classic franchise model and is great for newbies trying to make it in the business world. With single-unit ownership, you can focus on one location. Single-unit ownership is especially beneficial if you are new to franchising. With one franchise store, you can focus on running it as well as you can and getting a better sense of how the franchise business operates. Since you only have one location, your franchise cost will be lower, as well. The franchise cost goes up as you own more locations.  

Multi-Unit Ownership

You may decide to own multiple units of a franchise in a specific area. Usually, a franchisor will give you a discounted rate per unit. With this type of ownership, it is common for the franchise owner to be the owner/operator of their main unit while taking a semi-absentee ownership role of the secondary units. But as a franchise owner with multiple units, you have more to focus on and shouldn’t take multi-unit ownership lightly. 

Area Developer

Area developers are similar to multi-unit owners but on a larger scale with more units encompassing a territory. The area developer is granted the right to open a certain amount of units by the franchisor.

A misconception about franchising is that fast-food restaurants are the only kind of franchise to choose from, but this is not true. The great thing about franchising is that there are franchise opportunities in any industry that you can think of:

Choosing a Franchise

Deciding to invest in a franchise really is exciting and life-changing. There are many factors to consider when choosing a franchise, including your skills and financial situation. Additionally, you have to think about how many units you want to buy and the model of ownership you want to have over them.

Before owning a franchise business, it would be beneficial to speak with a franchise consultant. This professional connects franchisors and entrepreneurs who want to open a franchise. The franchise consultant will consider your background, skills, and financial wellness to determine if franchising is right for you. Based on their knowledge of how you own a franchise, the franchise consultant connects you to franchisors who align with your values and have an environment where you can succeed as a franchise owner.

Due Diligence Before Owning a Franchise

Speaking with a franchise consultant is just one part of the due diligence that you have to do before owning a franchise. Other important parts of the due diligence process include discovery day and franchisee validation. Entrepreneurs who want to open a franchise are invited to a franchisor's discovery day if they have what it takes to buy a business. During this event, which usually takes place at the franchise business’ corporate headquarters,  you can question the franchisor and other leadership team members. Ask a few specific questions in order to get the most of the experience.

Franchisee validation is also a good way to finalize your decision to own a franchise. As a prospective franchise owner, you can ask questions to existing franchisees in the system. The questions that you ask them should be thought-provoking and asked several times to get a good sense of how a franchise business really works. If you still believe that owning a franchise will beat you and the franchisor after this process, then go all-in and follow the system.

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Do you love helping people? Does the idea of being your own boss appeal to you? A career as a Franchise Consultant lets you have it all: a flexible, home-based business with incredible earning potential. And here’s the best part—your work will make a difference! IFPG provides:

  • Over 150+ Hours of Continuing Education
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  • Exclusive Agreements with Franchises
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IFPG also provides you with a CFC Certification that designates you as an expert in your field and grants you the recognition that you deserve.

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