Franchising is an exciting opportunity with a big return on investment possibilities. Eager entrepreneurs may be chomping at the bit to own their business, but don't want to take any big risks. Buying a Franchise is the best solution to individually owning and operating your business, at a lower risk, with higher rewards.
92% of all franchises are successful after 2 years of business. But those who fail often do not understand what they are getting themselves into. That is why we advise you to consider all your options, do your research, and ask those uncomfortable, but important questions.
A critical step in the franchise buying process is understanding what you are getting into. Make sure to do your homework and ask the right questions so you can be prepared to take the next steps. So what questions should you be asking when buying a Franchise?
1. Do you like the Industry you are entering?
You are not just buying a business, you are building a lifestyle. You have to be sure this business will hold your interest over time. Franchise agreements ensure franchisees sign on for a specific amount of time— which may be anywhere from 3 to 10 years.
2. What is the average time it takes for a franchisee to pay off their investment and start making a return?
The key to understanding the return on investment for franchises is digging into the sales process. The two fundamentals to consider are when you break even, and when you earn income. Learning the average ticket price and the average lead to sales per month is the best place to start.
3. Do you understand the financial and legal implications of purchasing a franchise?
Buying a franchise is not the same as launching a business from nothing. As a franchise owner, there are rules and regulations put in place to ensure every franchise location is the same to stay consistent. Obtaining a franchise lawyer ensures you are consulting an expert to help you through the process and disclosure agreement.
4. What is the cost to buy a franchise?
The cost to open a franchise varies from brand to brand. Chick-fil-A only requires cash of $10,000 to open a franchise. However, each Franchisee must pay 50% of their income to the franchise, plus 15% in royalty fees. This is a very steep franchise structure with many limitations.
Other Franchises range from $50,000-$200,000, which is where lots of successful franchises fall into. Depending on the franchise and the business model, each franchise is subject to different costs.
“At Honest Abe Roofing, it costs $150,000 to open a franchise.”
5. What is a typical day as a franchisee?
The day-to-day life of a franchisee will look the same as many entrepreneurs, but different depending on the goals of the individual owner. There may be a day where you have many meetings, and the next, you may focus on training, or building the sales process.
The daily life of a franchise owner may also vary depending on if you use a hands-on or hands-off approach. Franchise owners can benefit from either approach because of the business model adapted from the franchise.
6. Will I receive training before I open for business?
Training is provided by most Franchises. On-site training takes place on either the corporate location or the new location you are opening. During training, a franchisee is taught the business model, standard operating procedure, and how to operate tools and equipment.
For example, Honest Abe Roofing offers training in multiple areas including marketing, procedures, hiring, inside sales, and sales. A 12-week launch process begins when a new franchisee signs, beginning the training process.
7. How has the company grown in the last five years, and what is the current projected growth and timeline?
One of the most important questions to ask is the current and projected growth of the company. There is good growth, and there is bad growth. Growth does not always procure success. If a franchise grows too quickly, it may not be able to support the franchise owners like it once promised. Make sure you investigate the franchise's support and resources sufficiently. Do they have enough people and processes in place to support you, and others?
8. What is the timeline for opening day once an agreement is signed?
One of the great benefits of Franchising is the possibility of ROI. Because all of the systems and processes are established and successful, your independently owned and operated franchise already has a launch process in place. However, each Franchisee is different. It may take a few years to grow in your territory and expand your market. Make sure to stay realistic and create accurate goals for the future.
9. Can I sell the Business? Are there restrictions when doing so?
When you open a franchise, you are creating a lifestyle for yourself and your family. It’s important to make sure you are positive about this decision. However, sometimes you aren’t enjoying it or simply want a change of course. Certain franchises are built to be passed down for generations, and others are simply short-term businesses.
“Honest Abe Roofing is a Franchise built to last for generations.”
10. Are franchisees expected to contribute to a common marketing fund? If so, how much will I pay in marketing fees?
More often than not, Franchisees are required to pay a certain amount towards marketing and other processes put in place to help. The benefits that come from paying into a marketing fund include more leads, quality organic content, and professional commercial advertising. Depending on the company, franchisees can expect to pay anywhere from 1% to 4% for a marketing fund.
When choosing a Franchise, your future depends on picking the right company with the best market value and profitability. Working as an Honest Abe Franchisee offers you more opportunities, more territories, and more opportunities for success. Contact our sales team to learn more about how you can lock in your future for generations.