Are you an aspiring entrepreneur who wants to own a business without starting from scratch? If so, applying for a franchise might be the best option for you. The International Franchise Association (IFA) defines franchising as a method of distributing products or services that involves two parties: the franchisor and the franchisee. The franchisor is the owner of the brand’s trademark, while the franchisee is the one who pays a royalty for the right to do business under the franchisor’s name.
As a soon-to-be franchisee, it is advisable that you consider opening a fast-food franchise. Fast-food franchises are among the Top 100 Global Franchises as reported by Franchise Direct this year. To help with your decision making, here are the things that you need to do before buying a franchise:
Do a Self-assessment
IFA advises entrepreneurs to start a business in an industry that they will enjoy for the next 10 to 15 years. Do you have a favorite fast-food restaurant? If you like a Japanese restaurant, you should assess if your experience and skills will be helpful in selling its products, attracting customers, and standing out from the competition. Japanese dishes such as ramen, sushi, and tempura are known for their high-quality ingredients and affordable prices, so you already have an advantage in selling them to your customers. Buying your favorite fast-food franchise is a smart way to gain profit out of what you like.
Conduct Market Research
For your market research, it is important that you check the area of your potential store location. You should see if there are many potential customers in that area. You should also be aware of who your competitors are. To assess how other franchisees are managing the business, you should visit another nearby location of your target franchise, observe its current customer demographics and operations, and consult the franchisee about their experience. More importantly, you should contact the franchisor to inquire about the success rate of its existing franchises and learn more about the franchise agreement.
Determine the Costs
According Franchise Direct, the estimated cost to run one of the top fast-food franchises for three months is between $100,550 and $342,400. Some of the fees to consider are the initial franchise fee, real property, insurance, supplies, training expenses, opening advertising and promotion, and miscellaneous expenses. You also need to prepare a budget for professional fees to hire a franchise attorney and an accountant. If you want to run a franchise for a longer time, it is best that you save up to $1 million or more for your business investment.
Know Your Limitations
Becoming a franchisee comes with limitations. Since you are bound to the franchise agreement, you have to operate the business according to the procedures and restrictions set by your franchisor. You cannot change, modify, or add existing products, advertising, hours, and services. You should abide by the rules of the agreement to preserve the brand and protect your investment.
Compared to starting a new business from scratch, buying an existing franchise gives you an opportunity to discover the factors and strategies that lead to a successful business. With the franchise’s fame and reputation, you will have guaranteed and potential customers. Also, with the support that you get from your franchisor, you can stabilize your business and address problems in the future.