As with any business, the first step in determining whether or not to enter into the venture is to assess your reasons for going into business. If you feel you need a change, or you’re tired of having other people tell you what to do, then you should reassessyour decision before investing your time, money and energy because operating a business requires more than a need for a change, or the desire to do as you please. Purchasing a franchise like any other business requires a total commitment of your time,energy and financial resources. If you are not prepared to invest these qualities and resources into your franchise, then you should stop at this point.
EVALUATING YOUR SKILLS AND EXPERIENCE
Identify Your Reasons
As a first and often overlooked step, ask yourself why you want to purchase a franchise. This question, although basic, is anexcellent way of evaluating your reasons for going into business.List every reason you identify, no matter how farfetched it mayseem. Divide your list into two separate components. Separate theviable reasons from the trivial reasons and categorize themaccordingly. It isn’t unusual for reasons to range from the desire to be your own boss to the desire to be a billionaire.Whatever your reasons, remember that your future is at stake so try to be objective. Your checklist should include reasons such as these (check each that applies to you):
YES * Freedom from the 9-5 daily work routine ____ * Being your own boss ____ * Doing what you want when you want to do it ____ * Improving your standard of living ____ * Bored with your present job ____ * Have a product or service for which there is a demand ____
Some reasons are better than others, none are wrong; however, beaware of tradeoffs. For example, you can escape the 9-5 dailyroutine, but you may replace it with a 6 a.m. to 10 p.m. routine.
After assessing your reasons for going into business, next conduct a self analysis to determine if you possess the personalcharacteristics needed to be a successful franchise owner. Consider questions such as:
1. Are you a leader? ___ ___
2. Do you like to make your own decisions? ___ ___
3. Do others turn to you for help in making decisions? ___ ___
4. Are you willing to accept managerial assistance from the franchisor? ___ ___
5. Are you willing to comply with the provisions outlined in the franchise contract? ___ ___
6. Do you enjoy competition? ___ ___
7. Do you have will power and self discipline? ___ ___
8. Do you plan ahead? ___ ___
9. Do you like people? ___ ___
10. Do you get along well with others? ___ ___
These questions cover the physical, emotional and financial strains you will encounter operating a franchise.
1. Are you aware that running your own franchise will require working 12-16 hours a day, six days a week, and maybe even on Sundays and holidays? ___ ___
2. Do you have the physical stamina to handle the work load and schedule? ___ ___
3. Do you have the emotional strength to withstand the strain? ___ ___
4. Are you prepared, if needed, to temporarily lower your standard of living until your franchise is firmly established?___ ___
5. Is your family willing to go along with the strains they, too, must bear? ___ ___
6. Are your prepared to invest, and possibly lose, your savings? ___ ___
Answering “yes” to any of these questions means that you have some of the skills needed to operate a successful franchise; anegative answer means that you may have to acquire these skills or hire personnel to supply them.
Certain skills and experience are critical to the success of abusiness. Since it is unlikely that you possess all the skills and experience needed, you’ll need to hire personnel to supplythose you lack. There are some basic and special skills you willneed for the particular franchise you purchase. By answering thefollowing questions, you can identify the skills you possess andthose you lack (i.e., your strengths and weaknesses).
YES NO 1. Do you know what basic skills you will need to operate a successful franchise? ___ ___
2. Do you possess those skills? ___ ___
3. When hiring personnel, will you be able to determine if the applicants’ skills meet the requirements for the positions you are filling? ___ ___
4. Have you ever worked in a managerial or supervisory capacity? ___ ___
5. Have you ever worked in a business similar to the franchise you want to purchase? ___ ___
6. Have you had any business training in school? ___ ___
7. If you discover that you don’t have the basic skills needed for your franchise will you be willing to delay your plans until you’ve acquired the necessary skills? ___ ___
When you complete your self-analysis, discuss your results withyour family and financial advisor. Their feedback can help you make the right decision. If you all agree that you have most of the skills needed to operate a successful franchise, then youshould feel comfortable proceeding with your plans. If, however,they feel you lack most of these skills, then you may need toconsider delaying your plans until you are better prepared. Aboveall, be honest and objective with yourself; after all, it is yourfuture.
A more detailed self-analysis, the “Small Business Entrepreneur’sChecklist,” is located in Appendix I. This checklist is designed to assist you in determining what you actually know about operating a business, and the skills you will need to do so. Review it carefully before deciding whether or not to purchase afranchise or to go into business. If you discover that you lackmany of the skills needed to operate a successful franchise, youmay need to take some training courses or hire personnel tocompensate for these deficiencies.
Once you are certain that your reasons for going into business and the franchise you’ve selected are viable, gather theinformation that you will need to make an informed decision fromsources, such as: 1) a directory of franchises, e.g., the Franchise Opportunities Handbook (published by the U.S. Department of Commerce), 2) the disclosure document, 3) currentfranchisees, 4) other references, such as U.S. Small BusinessAdministration (SBA), Federal Trade Commission (FTC), BetterBusiness Bureau, local chambers of commerce and 5) professionaladvisors. Many new small business owners choose franchising over starting anew business because it provides easy access to an establishedproduct, reduces many of the risks involved in opening a newbusiness, provides access to proven marketing methods and in someinstances provides assistance in obtaining start-up capital fromfinancing sources.
Franchising can be advantageous as well as disadvantageous to both the franchisee and franchisor. A few of the advantages anddisadvantages are listed below. Study these factors carefullybefore choosing the franchise option.
- established product – failed expectations or service
- technical & managerial – service costs assistance
- quality control – overdependence standards
- less operating capital – restrictions on freedom of ownership
- opportunities for growth – termination of – territorial franchisee agreement right of subfranchisees – operating franchisee – performance of no rights other franchisees
- expansion – company-owned vs – limited risk franchised units – limited capital – equity investment
- motivation – problems with franchisee highly motivated recruitment – operation of non-union business – communication
- bulk purchasing – freedom
- cooperative advertising