As you consider launching your own businesses, you might be looking at becoming part of a franchise to realize those dreams. It’s a viable choice, however, as with starting from the ground up, owning a franchise comes with its fair share of commitment.
“During my 30 years of being a franchisor, people would come to me looking to get into business, and my job was to separate people who were really ready to become a franchisee and those who were taken by the idea that owning a franchise is a hobby – not so,” says Michael Sawitz, an SBDC business consultant and expert on franchising.
Sawitz has extensive knowledge in franchising. As founder of FastStart.studio, a mixed use business incubator and AIM Mail Centers, a national franchise company, Sawitz has in-depth wisdom about being a franchise owner. He has also been featured in Successful Franchising Magazine and Franchise Update magazine because of his comprhensive experience in starting, managing, and selling of several businesses in multiple industries.
Here, Sawitz shares the five most important things to consider before you decide to become a franchise owner.
- Are you fit to be your own boss?
Owning a business isn’t a game or hobby, it takes real commitment. Even those building a lifestyle business out of their homes are beholden to vendors, suppliers, supporters, and possibly employees and their families, along with customers – and if any of those relationships lack commitment, it creates a ripple effect throughout the business. People often focus on the fantasy of being their own boss and focus on financial gains and freedom… but neither of those things will come to fruition if you don’t have the right mindset, and the commitment to stick it out through the lean times.
- Are you a team player?
Being part of a franchise means signing an agreement that says you’ll adhere to certain standards, rules and regulations, and operations. When you sign on to a franchise, you’re agreeing to adopt a standardized system, and that makes you part of a team. Everything you do affects the franchise, so if you’re in it only for yourself, franchising may not be the right choice for you.
- What kind of franchise fits your end game?
The two most common reasons to franchise are to build a legacy or facilitate a lucrative exit. Choosing legacy means building your business so you can pass it down to family members. Creating an exit plan means building your business specifically to sell it and gain a buyout. Regardless of your path, you’ll want to focus on creating a robust and well-run business – but that starts in knowing what your ultimate goal is.
- Franchising improves your business odds by a large factor.
Running a franchise means working with a standardized and proven system of operations. Having a system in place that consistently delivers the same results means minimized failure and maximum profits. This is why companies like Sony, Toyota and Honda that embrace constant improvement are powerhouses – everyone is committed to improving as a team and following proven procedures that help the business succeed. For many business owners, this is the most appealing aspect of owning a franchise.
- Look at the costs related to franchising versus having your own business.
There are over 6,000 franchise concepts across the U.S. ranging from a few thousand dollars to millions. While it’s true you’ll make an up-front investment to become part of a franchise, your financial outlay will depend on what you invest in. The spread is large, but there’s a low entry level – and the Small Business Administration is franchise friendly, offering the 7A program for support. By comparison, it costs a lot more to launch your own business. Franchises afford you bulk buying and discounted products, and even national contracts that could save you tons of money. Plus, the franchise system is built to minimize mistakes, which can be expensive. So while you’ll pay an annual royalty based on your sales, that royalty isn’t necessarily about what you pay, so much as it’s about what you get in return.