With the start of the International Franchise Expo In New York next week I met with Tom Portesy, CEO of MVF Expositions to ask him for his thoughts on what people should be looking for, and thinking about before they decided to take up a franchise. What are the things that he believes you should know to help you to make a better decision and be more successful in running a franchise.
Here are seven questions that Tom says everyone should ask and get answered before taking up a franchise opportunity.
What is the total investment level required?
It's imperative that before you get involved, you need to know what the total investment is going to be. This includes purchase costs, opening inventory, and also how much working capital are you going to need before you break even.
Understanding the total costs is crucial, as you don't want to run out of money on the verge of success.
You also need to understand how you will finance the Franchise, as many people can actually afford a bigger franchise opportunity than they think.
What are your skills sets, and what are you passionate about?
You need to understand that when it comes to running a franchise you're actually a business owner, and you can hire people to deliver the service or sell the products that are on offer. For example you don't necessarily need to be an expert in painting to run a painting franchise.
Tom says that "Franchisors want you to be working ON the business, rather than IN it."
What are the time commitments required?
You wouldn't be the first person to trade a 12-hour job they hated for a 16-hour job that they hate, so make sure you understand what's involved. There are seasonal franchises that can allow you to work seasonally, but it's your business that you're running and you need to be clear about what the time commitments will be.
What is the Franchisor like?
You need to do your due diligence and understand everything you can about the franchisor. How long have they been in existence, how successful have they been, how long do clients stay with them.
Although just because a Franchisor is new doesn't mean it's a bad opportunity but the more you know, the more informed your decision can be.
What were the important factors for successful Franchisees?
Make sure that your due diligence includes other franchisees too. Try and get in touch with people who have been successful and also some that struggled.
Ask them what their success factors were.
What were the challenges they had to overcome?
What would they do differently?
And of course, how long did it take for them to break even?
As Tom said, "It's great to learn from mistakes. But it's even better if you can learn from those of others so that you don't repeat them."
How much support will you get from the Franchisor?
It's great to be in business for yourself, but not by yourself.
Make sure you know how much support you will get from the franchisor, what were other people experiences when the going got tough. How much support did they offer, or were you left to your own devices when the going got tough?
What is your exit strategy?
It's great to be clear right from the start what your exit strategy is going to be.
Are you planning to leave the franchise to your children, are you looking sell it, or just run it for a couple of years and then get out.
Knowing your end game will help you select the right kind of franchise, one that fits with, and supports your long term objectives.
Tom said that running a franchise can be a great opportunity, but you need to understand what you're getting into, who your getting into it with, and why. The better the answers you can find to the seven questions above, the higher your probability of success.
The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.