A New Small Business Franchise - An Opportunity or a Risk?

Posted by Janon Otto on Fri, Dec 16, 2011 @ 17:12 PM

New Franchise Businesses pop up all the time. If you are thinking of investing in one - how can you determine the risk? Every Franchise has to begin somewhere and some of the new ones are great opportunities. But, how can you tell?

Doing your homework is paramount when checking out a small business franchise. It does not matter whether the franchise system is old or brand new there will be similarities, the only difference in the documents that you will receive is that the list of existing franchisees or those that have left the system will be much less!

There are however many things you can ask about that will give you some good information to help evaluate the new franchise business.

  • How long has the franchised business been in existance. It may be that the business is very established yet has just begun franchising. Our flagship store opened in 1997, yet franchising just began in 2010.

  • Is the original concept operator still involved in the business? There are concept hunters out there who take a business and franchise it, yet they are not the ones with the years of knowledge they are just companies who see an opportunity to make some money franchising yet don't have the experience with the system to give you the training that you really need.

  • Has the original business been able to run more that one location?

  • Has the original owner tried many different ways of doing the business so they can direct you in what has worked vs. what has not? Making mistakes is not a bad thing. It is better that the franchisor has made them in the past rather than you making them in the future!

  • Is the original owner going to be involved in your training?

  • Is the business something that you can see being in demand for years to come?

  • Can this business be replaced by the internet or other means?

  • As franchising is different from owning an individual business what systems and processes has the franchisor put into place to make this conversion?

  • What does this business concept have that sets it apart from others out there that may be similar? Is it something easily duplicable? Is it something that will increase your bottom line?

  • How passionate are the owners about the success of this business?

There are both advantages and disadvantages of being in the first few to start a new business franchise -

  • As one of the first few you get much more individual treatment from the founders.

  • Your sucess or failure is much more important to the franchosr than those later in the system.

  • There are bumps in the road for any new venture, as the franchisor is also embarking on a new way of doing there business you may have to help smooth out a few of those, your input will shape the future for many to come!

Exploring a franchise can be one of the most rewarding things you can do to expand your business acumen.


Topics: how to buy into a franchise, Small Business Franchise Information, how to begin a business