How to Choose the Right Franchise

Franchise unitIf you read my previous post about franchise, you might already know that I have several franchise units.

Having a plunge into franchising without much knowledge about it teach me a lot about choosing the right franchise for me.

I have a few tips for those of you interested in owning a franchise unit:

  1. Don’t buy a franchise unit because it involves your hobby – Your hobby is fun, and running a franchise is hard work, although it can also be a bit fun. You will soon realise that making money out of your hobby is not that fun anymore – you’ll end up stressed-up and demotivated.
  2. Don’t buy a franchise because it’s cutting-edge – cutting-edge business is yet to prove itself in the marketplace. Although it might be hyped by the community, but we never know the business life-cycle. Is it rise fast and die fast? I suggest to find a franchise that not-so-cutting-edge, but stands firm at the test of time.
  3. Choose a franchise which own an own-unit or two – Don’t touch franchise that has no own unit! Choosing a franchise having one or more own units lets you see the business in action and the potential it has before you decide to own one.
  4. Choose a franchise which royalty fee depends on how much your unit make – Don’t choose franchise with a fixed percentage of royalty fee – It will bring your franchisee unit having a hard time early in its life.
  5. Don’t choose a franchise that boast fast ROI – NONE of them has fast ROI on most of their units. It’s usually true only for a small number of high-performing units. Run away from franchises that offer you a guaranteed BEP and/or ROI period.
  6. Franchises are also businesses – They can FAIL. A proven franchise can minimise the risk, not eliminating
  7. Don’t buy franchise unit to be rich and free – Being rich is a possibility. Sipping a cocktail on the side of a pool is wonderful. Alas, it’s not the typical lifestyle for franchise unit owners. Franchising demands a lot of you – rules to follow, limitations to negotiate. Anyway, it’s THEIR brand name you RENT in return for a franchise fee. Franchisors have any right to push you to grow your franchise units.
  8. Franchising may not the right venue for entrepreneurs – with limitations and regulations, budding entrepreneurs will get bored, and eventually fed up of all the creativity-limiting franchise system.

I’m not saying franchising is bad. I like it – I own several units!

But, entering franchising should be in the right attitude and understanding. Franchising is not easy, but it can give you hefty cash flow, if you can manage your units well.

Two last statements to be pondered – If you feel safe within rules and regulations, franchising is definitely for you – buy a franchise unit. But, if you love to against mainstreams and like to do things your own way, stay away from franchising – start your own business.

Ivan Widjaya
In a love-hate relationship with franchising