Franchise creation: what circuit to follow?

Franchising is an incredible small business segment. It can really be the gateway for new entrepreneurs to learn how to start their own business and allow those who do not feel comfortable taking the first step in entrepreneurship to make the leap. So when that investment opportunity presents itself, here are some tips to help you choose the right franchise and become a franchisee.

Decide whether you should be a franchisee or a real small business owner

Small business owners or true entrepreneurs find it difficult to follow the rules and enjoy complete freedom to make unfettered decisions when running their business and taking their own risks in building their brand.

A franchisor is someone who prefers the structure, guidelines and proven business system that comes with creating a franchise. Franchisees are generally not as “ego-driven” and are comfortable complying with the general requirements and guidelines of a franchise brand. Decide which side of the road you are most comfortable on and you will avoid the long-term headaches of choosing a path that doesn’t naturally suit you. If franchising is the choice, keep looking!

Identify your financial capacity to start a business

Generally, most franchisors will require that you have a certain amount of fixed capital to start your business. This amount could be for equipment, construction, inventory, supplies and other items needed to open the doors and start the franchised business model.

These tangible items can be added together and in a franchise disclosure document should be detailed to help you understand how much money will be required to open the franchised business. Whatever that number is, say €100,000 to start the business, it is recommended that you have double that amount before considering starting the business.

The additional €100,000 in this scenario would be used for working capital and financing necessary for the business to balance its cash flow.

Research the markets before looking for franchises

Knowing that the franchise you are entering into has market opportunities should be your first goal. Once you have identified the markets with the best opportunities, you can define the franchising brands you connect to. Very often people fall in love with a franchise brand first and then convince themselves that there is a market to support their love interest. Great market research can be done on the web or through free and paid market research data that you can access through a variety of databases. Develop your plan, then find the franchising system that helps you make it happen.

To help you open a franchise, be sure to interview the franchisor as you would the most important life decision you ever make. Take the time to find out who you are dealing with and make sure they are right for you personally and professionally.

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