Is Buying a Franchise Right for You? 6 Questions to Ask Yourself

Many people expect their franchisors to be fully invested in their success as a franchisee, and they assume they will receive the hand-holding they need to learn the business. In reality, after the sales process is over and you have completed the initial training program (which may or may not prove to be valuable), as a franchisee you will largely be on your own.

Without a boss and with no limit on how many days you choose not to go into the office, in order to succeed as a franchisee, you need to be a self-starter. If you do not have someone waiting for you to show up at 9:00am, will you be motivated enough to put in the effort to grow your business?

Buying a franchise involves a significant up-front investment, and franchisees generally need to have financial reserves on hand to cover their first several months of operations. As a franchise owner, your rent payments, royalty payments, advertising fund payments and employee salaries come first, so you may need to be prepared to live without a salary for several months (or longer) as well.

Most employment relationships are at-will, which means that employees are free to explore new opportunities as they please. Franchise relationships, in contrast, involve long-term (typically five or ten-year) contractual commitments. When you buy a franchise, you need to be in it for the long haul. It could take years to recoup your initial investment, and your franchisor may be within its rights to claim “lost future royalties” if your franchise fails before the franchise agreement term expires.

For most people, the allure of buying a franchise is the ability to hit the ground running with a well-known brand and a proven business model. But, once you get into the business and start seeing how things really work, you may want to start doing certain things your own way. Generally speaking, this is not an option. Franchisors have the ability to exert significant control over their franchisees, and they will often do so while providing only limited operational support.

Before buying a franchise, it is important to already have an exit strategy in place. Why? Most franchise agreements include non-competition and non-solicitation covenants that prevent franchisees from operating similar businesses or contacting their former customers once their franchise rights expire. If you are hoping to “learn the ropes” with the safety net of a franchise system so that you can eventually go into business on your own, you will likely need come up with an alternate plan.