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5 Questions You Must Consider Before You Buy a Low-Cost Franchise
Buying a low-cost franchise is an ideal way to limit the risks associated with starting your own fast food restaurant. When you’re comparing different opportunities, it’s vital that you find out whether a particular franchise is a good match with your desired investment level, experience and long-term financial goals.
Learning the answers to the following questions can help you make the best possible choice.
Topics of Discussion
- Is the Franchise Well Established?
- Is the Franchise a Good Fit Financially?
- Are Existing Franchisees Happy With Their Experience?
- Does the Franchisor Provide Ample Training and Support?
- Is There an Opportunity for Growth and Expansion?
1. A franchise that’s well established can offer the brand recognition that’s critical to help your new business thrive. You can also expect that an experienced franchisor will have the systems and procedures in place to assist you with all the different aspects of starting your business, including choosing a territory, site selection and lease negotiations, day-to-day operations and marketing the brand. To judge if a franchisor is a good match, you need to learn how long they’ve been in business, the experience of their management team, the level of support they offer franchisees, how many current and past franchise locations they have and whether the brand is well-known with a good reputation.
2. To ensure that a franchise is a good fit for you financially, you’ll first need to determine whether you meet a franchisor’s requirements for net worth and liquidity. Next, ask the franchisor for specifics on the total required investment, because these costs can vary greatly. Some of the expenses you can expect include the franchise fee, your location build-out, equipment, inventory, signage, rent, insurance, professional fees and business licenses. It’s also wise to ask how much working capital you’ll need to cover royalties and other ongoing monthly expenses, as well as day-to-day operating costs and payroll, until you’re generating a positive revenue stream.
3. Talking to other franchisees can give you invaluable insight into what it’s like to operate your own location and whether the franchise can meet your income goals. A franchisor can provide you with the names and contact details of some of their franchisees, or you can check Item 20 of the Franchise Disclosure Document. Ask each franchisee if the business has met their expectations financially, if they’re satisfied with their working relationship with the franchisor, how long it took to realize a return on their investment and whether they encountered any unexpected hiccups along the way.
Disclaimer: This information is not intended as an offer to sell, or the solicitation of an offer to buy, a franchise. It is for information purposes only. Currently, the following states regulate the offer and sale of franchises: California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Oregon, Rhode Island, South Dakota, Virginia, Washington, and Wisconsin. If you are a resident of or want to locate a franchise in one of these states, we will not offer you a franchise unless and until we have complied with applicable pre-sale registration and disclosure requirements in your state. Franchise offerings are made by Franchise Disclosure Document only.
