If you’re a would-be entrepreneur, you could start a business from scratch—but it’s a risky proposition. According to the Bureau of Labor Statistics about 20% of small businesses fail in their first year, and about 50% fail in their fifth year. Common problems include funding, a faulty product or one that is difficult to develop, a falling market, unforeseen competition, and the ability to hire a qualified team. Some risks are controllable but others aren’t, making for a difficult risk-reward equation. While the potential of a business may seem high, the prospects of facing bankruptcy, personal liability, and the emotional struggle of failure are also high.
For entrepreneurs who want a lower risk opportunity, another potentially lucrative path is buying a franchise like Cinch I.T., which offers the independence of small business ownership that is supported by the benefits of a big business network, with a product and business model that are already a proven success. While franchise ownership can be a great option for running your own business, there are many pitfalls if not carefully thought through. Here are some of the basics on finding a franchise opportunity that’s right for you.
Is a franchise opportunity right for your personality and business experience?
The very first thing to consider is not the franchise itself, but rather who you are and what will be your role as a franchisee. You will be buying into a pre-established way of doing business, requiring that you follow rules about what you sell, how to sell it, marketing, and more. If that appeals to you, you’re on the right path. However, if you’re an innovator who likes to do things your own way, it will likely rankle you to follow someone else’s rule-book.
It’s no surprise that most franchisees prefer businesses related to their passions and areas of knowledge. For instance, a musician may want a business where he deals with other musicians, sells musical instruments, and shares musical expertise. If the same musician has no experience dealing with accountants, detests dealing with regulations and paperwork, and hates the stress of having a huge seasonal crunch, a tax preparation franchise would be a poor choice. However, you don’t have to be an experienced technician to own an IT franchise like Cinch I.T. If your passion is to become a business owner, then this could be a good opportunity for you.
Personal desires aside, though, the primary passion of any franchise owner should be managing and building their own business. Evaluate opportunities in light of your own experience, skills, and work-life preferences to find the right franchise—one that leverages your skills, offsets gaps, and provides you with the greatest satisfaction and opportunity for success.
Is this a company you trust to support your business?
The foundation of the franchisor company will have a direct impact on your operations, costs, and profits. Find out about:
- The executive team that is responsible for high-level corporate decisions
- Company performance, franchise stability, and track record
- The franchise support team, who will be sharing the business model, training you, and providing ongoing business support
- Franchisee resources, such as technical assistance with complex sales and projects, additional manpower, and consultation in operational areas
- The satisfaction of franchisees and their experience with the company
What type of franchise model meets your needs?
One of the beauties of a franchise is the guidance and support you receive. It’s essential to understand the advantages and disadvantages of the types of support available, exactly what you and the franchisor are responsible for, and how well the franchisor meets its commitments to franchisees. Your agreement will likely cover support for site selection and development, training, meeting brand standards, field support, and advertising. Know the details of your agreement!
What’s brand got to do with it?
It may seem natural to go with an established, major brand, but it’s not a guarantee of success, especially if the type of support they offer isn’t a good fit for you. A good choice can also be a smaller or newer brand with a strong niche, high growth, and a great industry reputation. Whatever the size and history of the franchise, find out what makes it special. Can you get excited about what it brings to the table? How is it different than franchisors in similar categories? Then, even if you are excited by the opportunity, don’t jump before you research the market opportunities in your area, such as level of demand for the product or service, local and regional competition, if you have exclusive franchise rights in your territory, and more.
What are the financial considerations?
Upfront investment, which can be several thousand or even hundreds of thousands of dollars, may be required for brand name rights, location set-up costs, real estate, location buildout, and equipment. Ongoing costs may include royalties based on gross income, contributions to national or regional advertising, training, inventory, and insurance. And of course, you’ll want to know your potential earnings. Your franchisor may not be able to disclose the financial performance of individual franchise businesses, so it may be up to you to reach out to other franchise owners to find out how they are faring financially.
What else goes into the franchise mix?
When considering all the options, some of the most important items may be in the terms of the franchise agreement. The best advice is to always, always talk to a lawyer to understand every single item. For example, how long do you own the rights to use the franchisor’s brand name, logo, and business methods? What are the terms for renewal? Do you need to purchase supplies, products, or services from the parent company, and if so, are those prices competitive? Can you sell the franchise if you wish? Ask all the questions you can, and leave as little as possible to chance.
Most important, be thorough when you do your research so you can be successful and enjoy running your own business. If you are a sales professional interested in owning a one-of-a-kind, fast-growing IT services franchise, learn about the exciting opportunities at Cinch I.T.