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5 Things to Consider Before Buying Into a Franchise

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If you are thinking about investing in a franchise, there are many things to take into consideration before diving in head-first. Doing your homework is essential–if you buy into the right one, you may find yourself running a very successful and profitable business. On the other hand, a hasty investment made without proper consultation and research could end up leaving you in a financial hole you can’t climb out of. Here are several things you should consider before making the decision to buy into a franchise.

Franchise Options

There are many different franchises for investors to consider–from hotels and restaurants to cleaning businesses and car washes, the possibilities are numerous. If you want to buy into one, it’s important that you pick one that suits your interests. If you don’t buy into one that you believe in, it will be impossible to truly stand behind it. If that’s the case, your chances of success decrease substantially. Not only is it essential that the franchise you choose be one that interests you–it should also have a solid reputation, be in demand, and should suit the location you have in mind. All of these factors should weigh in heavily when studying the franchising opportunities available to you.

Start-Up Costs and Financing

Each franchising company has a different start-up fee for investors, and the type and brand of franchise determine what the price-tag will be. How much of your own money do you have to invest? How much will you need to borrow? Some hotel and restaurant franchises can run into the millions–if that’s the type of business you want to invest in, be prepared to find a good lender. Buying into a franchise is usually an enormous financial commitment– consult with a reputable business banker, lawyer, and the franchising company itself to make sure you understand exactly what you’re getting yourself into.


It usually takes some time for new businesses to start turning a profit, and before you invest your money, you need to make sure you have the necessary reserves to keep your franchise afloat until you start seeing green. Franchises have an advantage over other small businesses because they already carry with them a brand name that consumers have come to recognize and trust. Although this increases your chances of success, you still need to be prepared to sink additional money into the business if you’re not profitable right away. Get figures from the franchising company and talk to other franchise owners–if this is going to be your livelihood you need to know if it will be a profitable decision in the long run.

Franchisor Support

Because franchising companies have worked hard to build a brand that customers can count on, they typically provide support and training to their investors to insure consistency among their franchisees. If you’re interested in a particular company, you may want to ask other franchise owners within the brand about their experience with the company. Are they trustworthy and dependable? Are they there for their investors when needed? Support from the company and training for both you and your employees is vital to the success of your franchise. Make sure the company will have your back, so to speak, so that you can get your business up and running both quickly and smoothly.

Time Commitment

In many cases, the investor of a franchise is also the person who will be operating the business. If it’s true in your case, you need to realize how much of a time commitment it will be for you. If you’re the boss, be prepared to work long hours–especially in the beginning–and understand the amount of work you are about to undertake. You have a brand reputation to uphold, a staff to manage, and customers to please. Buying into a franchise not only requires investing your money, it will require you to invest a huge amount of time as well.

The decision to invest in a franchise is a big one, and it shouldn’t be made lightly. Take the time to research your options and get informed. With knowledge and support on your side, you will have a better chance of success should you decide to buy into a franchise.

Guest post from Andy Granger. Andy writes business insurance reviews for BusinessInsurance.org.

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