5 Factors to Consider Before Buying a Franchise

Posted by pooja sheth on July 11th, 2019

If you want to start your own business in the future but are not ready for it yet, you might want to consider purchasing a franchise instead.

Now, how does it work? You, the franchise, will sell the goods and services of another company, the franchisor, under their name for a fixed period of time.

Purchasing a franchise has its advantages and disadvantages. There are 5 factors that you should consider before buying a franchise.

1. Demand

This is something which is important to consider before starting a business as well. You need to find out if there is a demand for the goods you are willing to sell. Sometimes what is being sold in large amounts in one country or even one state might not do well in another. Suppose, the same company has 2 franchises. The franchise for sale in Gujarat might not do as good as the franchise for sale. Research is the key here.

2. Money

This is one of the biggest reasons for people backing out from purchasing a franchise. A portion of the total amount you earn goes to the franchisor for providing you with licensing rights, equipment and training. The company can take millions from you in this case. Always research what the company has to offer.

3. Competition

There can be several franchises of the same company and other companies as well in the same area. Suppose there is a franchise for sale in Ahmedabad and you buy it only to realize that there are 20 other franchises in the same city. Again, research whether the franchise you want to purchase will be able to get you enough recognition. It can be hard with many competitors in the market. Make sure that the product is unique or is in great demand.

4. Training

If you don’t have any experience of owning a business, looking for purchasing a franchise that provides proper training might be a good idea for you. With proper guidance from the same company, the chances of your franchise being successful will increase immensely.

5. Restrictions

The franchisors can impose certain restrictions on the franchisees about how their franchises are to be run. These are often presented before the franchise beforehand. The control is always in the hands of the franchisor. If you’re not comfortable working under the guidance of someone else, owning a franchise might not be for you.

You should definitely consider these factors if you’re thinking of buying a franchise. It might be for you or it might not be for you. Always research well and ask other franchisees if you need to before buying one and then regretting it later.