Home Based Franchise Opportunity Business
Buying a home based franchise opportunity business as a way of starting a new business is seen as a lower risk alternative to starting from scratch on your own.
As with any business it is important to properly evaluate the opportunity before jumping in. With an existing franchise, you will be better placed to ensure the market and the business model is sound before starting your new venture.
If franchising is a path you would like to go down, here are some tips to help ensure your success.
- Look for BFA accredited franchises. See the International Franchise Association website . Membership isn’t a guarantee of success but at least you know you are associating yourself with an organisation who has met reasonable business and ethical standards.
- Smaller less proven franchises can be very profitable and a bit cheaper but will have a higher potential risk. Larger more established franchises tend to be more expensive to offset the reduced risk. If you already well understand the market you are thinking of getting into then you can lower your overall risk
- Always visit the Franchisor’s headquarters, talk to their staff and get a feel of what it would be like to work with them. If there is an option of a trial period and you can afford the trial conditions always take advantage of the opportunity.
- Be sure the Franchisor runs you through a vetting process. A sign of potential looming disaster is a franchisor whose only interest is ensuring you have enough money to find the setup fee.
- Get a list of all the franchise outlets currently in operation and interview a random selection. Don’t be guided on who to interview by the Franchisor, you need to make the call. A good operator will let you speak to any of their operating franchises. In your interview look for the franchisees perception of the strengths and weaknesses of the operation.
- Be aware of potential competition. Unless your product is unique and protected by patent, then at any time a competitor could open up business right next door to you. This is especially so for products which are new to the market. For older more established products the chance is less if there is already a reasonable amount of competition in your area. How would you business survive if someone opened next door and turn-over halved.
- A good franchise will be offering some sort of unique product or service. Get a feel for how easy it would be for a competitor to duplicate your proposed offering.
- Even if you are a financial wiz, get someone independent to review the financial projections. This is because everyone looses a bit of objectivity when looking to buy a business. A fresh set of eyes will pick up on items you may have met and will not be scared to challenge you on any obvious weaknesses in the financial projections.
- Ensure the proposed product has a good profit margin. Not only will you need to feed yourself but most likely you will need to pay the franchisor a percentage of the turnover too.
- To stay in business and remain competitive the Franchisor needs to be continuously innovating, finding new products to sell and looking for smarter, cheaper ways of running the existing operation. Ask the franchisor what strategy they have to innovate within the franchise.
- Be careful of operations that are totally dependant upon one person, most likely the founder. How would the franchise as a whole operate if any one of the franchisor’s team left the business? If the franchise as a whole was sold, is it likely the business as a whole would continue to operate effectively? The business must be resilient to change within the management structure. This usually comes back to how systemised the franchise is.
- Think also about how well the franchise (if buying a new territory) will work in your area. It may have well been a success up country where the socio-economic mix is different but it is important to understand why it has been successful and satisfy yourself that it will suit your proposed are also.
- Consider how well the business will survive in different economic conditions. How would it fair in a recession, would people still buy its products or services? When starting out always look for something which is recession resistant. It won’t be as exciting or glamorous but at least you will still eat if the economy turns down for an extended period.
- Most franchises establish a promotional fund where a percentage of the turnover is used to promote the product in your area. Be very clear on how much say you have in how this money is spent. Over time you will have a very good idea of the best use of this fund and will want to have a good say in its use.
- Don’t ignore the chemistry between yourself and the franchisor. If you take this opportunity you will be working closely with your franchisor over an extended period of time. You must operate off similar principles to them or every decision into the future will be fraught with difficulty because of the variance of approaches.
- Lastly, don’t pick a business which just appeals from a financial perspective. Look for a business that you are genuinely interested in. Something which is or can become your passion. Its your love or not of the business which will be picked up by your customers – they will keep coming back to someone who constantly provides great service, and to do that day in, day out you just have to love what you do!
Filed under: Opportunities • Resources
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Thanks for the franchise information. I have thought several times about looking to a franchise business but I’m nervous about investing so much money even though they are typically less expensive than starting from scratch.
The least expensive franchise is still a reputable MLM company, with unique products and a history of solid earnings growth. they ar not difficult to find. But be aware that you need to invest in learning how to market your products. I mean, real direct marketing, not the “warm market” things that your company is telling you. Consider it cost of doing business; better to invest in your skills than in a franchise fee.
Good advice indeed. Way your investment requirement, time comment, and franchise requirement before making your investment and your financial resources. Oftentimes getting into a francise requires a substantial amount of money and time. More importantly think about your lifestyle-what are you really looking for–more money, free time?
Just consider all the angles.
The only franchise I’d consider owning is Jimmy Johns. I freakin love that sandwich shop. If your not familiar its pretty much a great sub shop that delivers quick, real quick. The use real food and home baked bread. I’d buy one just to have a great spot to eat lunch. I did some franchise work with a service business I owned, never actually franchised it and sold it, just designed some systems and things. Franchising is a great way to expand a business or idea and a great way to engage 100% of the people your working with. Its also a great distribution model.
Essential information for purchasing a franchise. Many of our customers are seeking loans/funding to purchase a franchise. Bookmarked this list as an additional resource.
Really great bulletpoints here! Some seem so obvious, but it’s amazing how many people franchise without considering these things. For example, how many people build failed franchise locations because they don’t know the needs of the area they are building in? I can think of at least 5 franchises that have failed in my area in the last 4 years because they don’t fit our needs, while there are many others that open and do well because they understand the neighborhood and what it wants. Great, easy to understand article. Thanks for taking the time to share it with us!
Ya it’s really working!
My husband and I started our home based business over six years ago. We both wanted to work out of our home and be together raising our children. We didn’t want to send them off to a daycare center. Don’t get me wrong, I’m not putting down daycare providers. They work hard. But I just didn’t want the traditional family lifestyle of one or both parents having to work out of the home and really not be a part of our children’s life