Series: Questions to Ask Yourself Before Considering Owning a Franchise (Part 4)

This is part 4 in a series for you to use to ask yourself if a owning a franchise is right for you! Recently I took a short business trip which required some air travel. My traveling companion on the way back, not getting my subtle hint of isolation that my Ipod Touch and headphones projected asked me about my trip and then my profession.

Business Front Door (Photo credit: chunter01)

What followed was a series of questions that started out in very familiar terms: “You know, I have always wondered about getting into business for myself but I’m not sure I’m qualified or that it’s right for me. ” What followed was most of the following questions that are commonplace and typical. So, in only a mild order of importance or, more to the point the way they seem to flow, are my twelve or so typical questions people have burning in their bosoms about franchise business ownership.

You will notice that some do not have definitive answers. The reason is the kinds of business, the market segment and the format that franchiser has selected affect many of these conditions. How the franchise companies answers those ubiquitous scenarios however may affect what interests you and it behooves you therefore to get them answered before moving deeply into a full-blown investigation.

I am eating through my savings while I am without a job. How soon can I get open if I started today?

First, just to understand how the investigation and opening process goes you should expect the entire process to take anywhere from as little as 45 to as much as 180 days.

What are my capital requirements

This number is different for every franchise. There are three numbers the franchiser is interested in that relate to you:

A. What is your net worth – a franchise company has to have this information to determine if you can qualify for financing and whether you will be able to acquire a lease on space (perhaps) because every landlord requires you to have a certain net worth.

B. What do you have available in terms of liquid capital? There is a certain amount of money you need for the franchise fee, opening marketing and working capital. It is different for every franchise. There is a minimum number and a typical number that the franchiser will require. You would be wise to add an additional 10-20% on to that number.

C. What was your last full years earnings? This is important because, typically, regardless of what you tell the franchiser, they want to know if their concept can provide you at least the earnings level you are accustomed to earning. If it doesn’t then why bother?

Is it necessary to have a good credit rating?

Probably yes. Even though you may be able to convince the franchisor that you have sufficient net worth and working capital, (plus experience, passion and knowledge) to start the business, there will be other related business components that will require a good credit standing. Think about trying to open a bank account, trying to borrow money, signing a property lease, etc.

John is a 30 year professional of the franchise industry. He has owned them, been an executive and has had his own consulting business for over a decade helping hundreds find the precise business that gives them what they are hoping to find in their own franchise business. – Ph: 480.838.1641 –


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