Before You Buy a Franchise Find Out Why the Franchisor is Franchising

If you are considering buying a franchise of your own you might want to consider a couple of questions that you should ask the franchisor or prior to your purchase. One question I always like to ask franchisors on behalf for franchise buyers is; why did you decide to franchise, and expand your business this way? Why didn't you just start opening up all your own locations? Their answers to this question can be very revealing.

You see, if they are franchising just to make a lot of money and franchise fees then they are probably not very good businesspeople because it costs about $1 million up front in capital to franchise and it takes a good 5 to 10 years to really get a good return on investment in the franchise industry.

It's a lot of headaches, a lot of litigation, a lot of sacrifice, and a tremendous amount of work to franchise a company. Although it is enticing to become the next Ray Kroc (founder of McDonalds) the reality is that the failure rate amongst franchisors is five to one over the first five years. Those are not very good odds when you're risking $1 million in working capital.

If however the franchisor has a great product or service that is very much desired by the consumer, but realizes they simply cannot expand fast enough to conquer the marketplace and attain a huge chunk of the market share, then sometimes franchising really is the best way to go especially if they have the right team behind them and the million dollar war chest. Please consider all this.

Lance_Winslow

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