Investing in a Franchise: A few problems to avoid

Its apparent that franchising is in many cases an effective way to start up a business, nonetheless, you can find online alot of negative stories regarding people losing cash, their franchise system failing, etc. Obviously there are no guarantees but with some shrewd deliberation and research, one could lessen the potential for failure as much as possible and do your best to make sure your franchise business is a winner. There seem to be a number of frequently recurring issues so heres a handful of ways to avoid them:

Mistake 1: Not checking the authenticity of the Franchise owner

I’ve come upon comments online where it sounds as if people have thrown capital at a downright rip-off! Remember that you’ll likely be paying a substantial amount of money to the franchise owner as start-up ‘franchise fee’. In addition to this, you’ll be building a long term business rapport with them so its imperative that you know as much in relation to their background and history as possible. On the internet is a great place to look for the company and investigate its background. Its also worth checking the Directors past history to determine what other organizations they have been, or still are, involved in. Other beneficial sources of company information can be the Companies House website, opening talks with the franchise departments of the main high street banks and specialist franchise business consultants who could have the capacity to give you some industry opinion on any franchise business opportunity you might be considering.

Mistake 2: Not talking to people who are already doing the job!

If you are purchasing a product then the most effective reviews and recommendations come from acquaintances and other people who generously disclose their opinion on it. From this you can take a well educated decision of whether you’ll buy a product. The same is true for a franchise business. Make sure you get a listing of some franchisees from the franchise operator as ‘references’. Make contact with them and, if possible, arrange to get together with them to get a feel for what you would be doing. They’re likely to be your greatest source of response on how encouraging the franchisor is and how well the franchise system works for them on a day to day basis.