What to know before buying a franchise?

There are some topics that should be evaluated before buying a franchise, as they indicate whether this is the ideal business model for you.

Franchises offer good opportunities for those who want to acquire a “ready-made” business, but some costs in this model may be a little higher, so it is important to plan carefully.

In today’s content we will see some of the main questions that every entrepreneur must answer before signing the contract. Continue reading to follow along!

Plan before buying a franchise and increase your chances of success

It is very likely that you became interested in purchasing a franchise after hearing countless reports about this business model being easier. But is it really?

This opinion is due to the fact that the franchise is a company that already has an established brand and a ready-made business model, which facilitates both market positioning and day-to-day management.

However, if on the one hand you receive these “gifts”, on the other hand, you need to bear additional costs to use a third-party brand, in addition to needing to invest in specific infrastructure and materials to maintain the network’s standard.

Therefore, before deciding on this investment, it is important to evaluate all costs, which can sometimes be up to 3 times higher than the cost of starting a business from scratch.

So, plan ahead and avoid surprises!

++Loan to open a franchise: what are the recommendations? (timesback.com).

4 questions to ask yourself before buying a franchise

As we saw previously, buying a franchise requires a detailed assessment of the costs, which can be much higher than starting a business from scratch.

Furthermore, the simple fact that a brand is famous does not guarantee that it will work in your region, so carrying out a market assessment is very important.

To help you with this mission, below we will see 4 questions that must be answered before buying a franchise.

What is the average return on investment time?

The initial investment in a franchise is usually higher, after all, you are acquiring the right to use the chain’s brand and the initial infrastructure.

In general, famous brand franchises cost between 120 and 300 thousand dollars, and it takes some time for the franchisee to recover this investment and start making a profit.

Some brands promise a return in 24 months, while others give a period of 60 months, and we even have those that do not provide any forecast.

Knowing this period is important, as you must know that you will spend at least 24 months without receiving a profit, so you must prepare for that.

It is worth saying that this varies according to the personal strategies of each entrepreneur, but it is worth carrying out this type of analysis as a precaution.

++Popular Franchises in the US: What You Need to Know – TimesBack.

What is the brand support?

The secret to buying a franchise is choosing a brand that offers good initial support, after all, it takes time for the franchisee to understand how things work.

Some brands offer marketing assistance, while others help with the business model and adjusting the standard of products and services.

It is worth mentioning that just as there are brands that offer the assistance mentioned above, some do not even answer questions via email, so be aware of this point before concluding the contract.

Considering that when purchasing a franchise you must follow the brand’s business model, not having any support will put you in difficult situations, so avoid this type of contract.

Royalty Price

When we talk about royalties in the franchise market, we refer to the percentages of revenue that must be paid to the original brand for the right to use the image and brand.

Not all franchises charge this, but some that work with themed materials (such as cartoon giveaways or celebrity advertisements) may charge this fee.

In general, this charge is legal, and corresponds to a percentage of the franchisee’s monthly revenue.

That said, it is important that you evaluate the brand’s royalty rate before purchasing a franchise, as this affects your final revenue.

Is the franchise suitable for a particular location?

Have you ever stopped to wonder why there aren’t McDonald’s stores in every region of the world? Especially in rural cities, it is common not to find the brand.

This is because after carrying out studies, the brand understood that there would not be good sales opportunities in that region due to low public acceptance.

Therefore, before purchasing a franchise, it is important that you evaluate whether that brand would be successful in the region where you intend to open the unit.

Having a swimwear store in a cold region, for example, may not make sense. The same goes for opening a snack bar where there is already a very similar one on the same street.

Carrying out this assessment will help you attract an audience more easily, thus selling a lot and recovering the amount invested in a short time.

Evaluate costs before buying a franchise

The real secret to buying a franchise is in evaluating costs, because many get carried away by the proposal of receiving a “ready-made store”, and do not understand that this has a price.

Not calculating costs well can leave you in a delicate situation, as it takes longer to receive profits, and until that moment arrives, if there is no preparation, you will have difficulties.

Therefore, prefer to choose a simpler franchise, but one that offers a good chance of return, rather than opting for a big brand that will take a long time to pay off.

Finally, remember that the market is full of franchise options to choose from, so evaluate your conditions and find your dream business.

Also read: Franchises: A Safe Option for Those Who Want to Start a Business? (timesback.com).