The need to attain financial security drives people to try their hand in entrepreneurship. While it’s true that a fraction of these people are successful and build significant wealth, others encounter severe headwinds on their journey. Research shows that over 50 per cent of the new businesses don’t make it past the five years of operation.
Research also shows that buying a franchise gives your business a fighting chance in a tight market, increasing your chance of success. If you’re thinking of purchasing a telecom franchise, you need to bear a few crucial factors in mind to harness the benefits that come with it:
Look at the Profit Margins
Turning a healthy profit is at the heart of business success, and as such, this should be a focal point when looking to buy a franchise. Aside from the joining fee and capital requirement to set up your branded shop, take a fine comb through financial returns. Such information is readily available from the franchise disclosure document as it presents detailed financial information of the chain.
You need to go beyond the average income per store and look at the best performers as well as those that are struggling. You need to be sure of how many units you need to run to live comfortably. You might be surprised to find that you need to operate several outlets to generate enough income to live the life of your dreams. For better insights, look at the profit margins alongside the annual turnover.
Look at the Franchisor’s Credibility
The Internet is awash with news about rogue franchisors who hang out their franchisors to dry with surprising regularity. In some instances, these unscrupulous operators cost their victims their entire livelihood leaving them broke and desperate. Therefore, you need to practice your due diligence before making up your mind.
The FDD can offer insights into the credibility of a franchisor. If other franchises are continually suing the parent company, there’s a chance that the company engages in unfair practices. Be wary of a chain that is licensing too many people in your immediate neighbourhood. It would mean that they are looking to cash in on the signup fee at the expense of your success. It will expose your business to unnecessary competition, given that you’ll all be carrying a similar range of products.
Look at the Market
While its’ true that buying a franchise with many significant advantages, you need to play your cards right to harness them all. Therefore, you shouldn’t assume that success is guaranteed after buying one. As with any other business, you need to generate enough sales to keep the company afloat.
Engaging in thorough market research before committing to a deal is the key to business success. With the help of an expert, you can establish the minimum viable population necessary to generate sustainable sales for the business. You need to dig deep into the demographics of the target population to see if they have sufficient buying power to keep your business in operation.
Buying a franchise gives you an edge on the market compared to starting a business from scratch. To harness all the benefits that come with getting one, you need to carry out your due diligence. Only then can you avoid making costly mistakes that put your investment at risk.