I have been in franchising for 23 years and a franchise consultant for 17 years. I have lived through a few economic downturns, including the great recession a dozen years ago. I have witnessed that when the world becomes uncertain, people make bad decisions such as pulling money out of the stock market, joining a multi-level marketing company, or buying a franchise that doesn't make sense. I have had great success in a franchise and failed miserably with a franchise. If you're thinking about buying a business, franchised or not, here's what you need to know:
- Because a business is a franchise does NOT mean that it's a solid model and has all the kinks and pitfalls worked out.
- Avoid investing in a new concept that doesn't have more than 25 franchise owners open for more than one year and who are happy owners.
- Do not become infatuated with a business or its product or service.
- Sidestep any concept that is a new industry. Educating the public is expensive.
- You cannot change consumer habits without a lot of time and money.
- Just because your town doesn't have a particular concept does not mean you should be the one who brings it in – why is there not one in your town?
- Investing in something that is your hobby most likely will end unpleasantly.
- Don't buy from the consumer's perspective. Understand what your role will be in the business
- Be sure the franchise company has franchise support experience and not just a great sales team.
- Talk and visit with as many franchise owners as possible, don't let the company steer those conversations.
- Whatever you think the cost and time to open will be, add 20 percent more to be safe.
- Having long lines and lots of cars in the parking lot does not indicate that the business makes money.
- The amount of money you invest is not congruent to the money you can make.
These 13 points are mistakes that can be avoided if you know the unbiased reality of how to choose a business. I will be expanding on each of the 13 items in the weeks to come because jumping out of a job and trying to get control of your finances via a business may become very appealing as we head into uncertain economic times. Please look out for those installments.
If you are kicking around the idea of business ownership at this point or know someone who is thinking about a career change or diversifying their investments, please make an introduction today.
All my best,
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