Are you prepared for what buying a franchise will mean for your personal and professional life? Here are the top eight factors to consider before buying a franchise.
Before buying a franchise, make sure it’s in an industry that piques your interest. Becoming your own boss is great, but enjoying the industry is even better. Passionate business owners are some of the best business owners. You don’t want to hate the industry because, in addition to the financial commitment, you’ll be investing a significant chunk of your time, especially at the beginning.
Understanding the industry is a big part of what to know before buying a franchise. If you’re set on the industry but your desired market is already flooded with that type of business, consider a different market. A quality franchisor will have thoroughly researched target markets where they believe their franchisees can thrive.
This is one of the critical factors to consider before buying a franchise. Consumers’ interests and needs are ever-changing, and you don’t want to invest potentially hundreds of thousands of dollars into something that could go out of style in five years.
For example, healthcare is an excellent industry that’ll always be in demand. American Family Care (AFC) is a leading urgent care franchise that offers affordable and convenient healthcare.
3. Investment Costs
Identifying your investment capabilities is crucial before buying a franchise. Initial investments for franchises can be anywhere from $25,000 to $5 million. The initial investment includes the franchise fee — your entrance payment to the franchisor’s proprietary business systems, licensing, and trademarks. Other initial expenses include real estate, equipment, vehicles, and grand opening marketing. The franchise disclosure document (FDD) will lay out the upfront costs. Franchisors will also have liquid capital and net worth requirements.
Don’t forget to consider ongoing costs too. These include royalty fees and advertising fund contributions. They’re typically a percentage of your monthly revenue. Compare franchises in the same industry to understand what to expect. Plus, once you’re done with training and have been operating successfully for a few years, ask how you’ll still benefit from those expenses. Talk with current franchisees to see if they think the investment costs are worth the business.
One of the significant benefits of franchising is that often, no specific experience is required. Franchising allows people to open businesses they’re passionate about but may have little experience running. Your chosen franchise should have robust training systems to guide you to success.
These training programs often include several days at the franchisor’s headquarters and on-site training at your location. Training should cover brand standards, operations, marketing, advertising, and computer systems.
While you won’t always need industry-specific experience, management experience can be invaluable in many fields. Understanding how to deal with different personalities, respond to crises, and solve problems are skills that translate into many franchise opportunities. The capability of hiring quality people is also vital to running a franchise.
For example, owning an AFC franchise means hiring people to serve and treat patients daily. They’re the face of the business, so you’ll want to hire a team of caring and compassionate healthcare workers to serve your patients.
5. Ongoing Support
Support throughout your franchise agreement should include marketing, site selection, business coaching as well as preferred vendors for construction, furniture, equipment, and software. In addition, some franchisors will help with staffing and billing services. This support allows you to focus on growing your business and building a relationship between your business and the community.
This is another great issue to discuss with current franchisees. Do they feel that what the franchisor offers support-wise is worth the investment?
6. Personal Time Commitment
There are different ways to run your franchise. For example, you could be an owner-operator or an absentee owner. Each requires a different level of involvement.
Understanding the amount of time you’ll need to put into the franchise is a critical part of what to know before buying a franchise. Consider hours of operation, how much time current franchisees spend in their locations, and what the franchisor expects of their franchisees.
7. Franchise’s Track Record
Assess how many locations are opening and closing. The FDD will lay out this information. It could be a red flag if a bunch of territories or locations closed in the last year. Ask the franchisor for an explanation.
8. Potential Profitability
In general, franchising builds better profits than an independent business, according to NerdWallet. Some franchisors disclose financial performance representations under Item 19 of the FDD. It’s not required but is helpful for getting an understanding of for sales, income, and profits as reported by franchisees in the previous year.
Franchise with AFC
Interested in joining the $47.9 billion urgent care centers industry? AFC offers a variety of franchise strategies for ownership. Find your perfect fit between single-unit or multi-unit ownership, an area development franchise, or a master franchise.
If you’re ready to learn more about the American Family Care franchise opportunity, we’re prepared to answer your questions. Apply today, and we’ll reach out to fill in the gaps.