Is Franchising a Fit for You?

Before taking the leap make sure you've thoroughly researched every nuance of this business model.

learn more about Brenton Hayden

By Brenton Hayden


Opinions expressed by Entrepreneur contributors are their own.

If you're thinking about getting in on the franchise game, you may believe that your biggest question would be whether to open a donut shop or a car wash.

But according to Joel Libava, franchise expert and advisor, the real question is whether you should buy a franchise at all.

While franchises are growing in popularity; over 100 franchise systems being opened each year, the sad reality is that many people enter into franchise agreements, thinking it's a fool-proof plan for success. But the fact is that franchises still fail at about the same rate as independent businesses. "Twenty years from their start, less than 20 percent of the franchisers will still be around," says Professor Scott Shane of Case Western Reserve University. "In fact, of the more than 200 new franchise systems established in the United States each year, 25 percent don't even make it to their first anniversary."

A lack of proper screening by the franchisor combined with a general unawareness of the franchisee's part are contributing to this problem.

Related: 20 Franchises You Can Launch for Less Than $50,000

Franchising isn't something that should be rushed into. Unlike small independent businesses, which can often be started with minimal capital and then scaled organically as the company grows, franchising generally requires a significant up-front investment. Then there's the fact that many franchises don't show a profit for the first year --or more; and preparing financially for this situation is something that many franchisees tend to overlook.

If you're considering franchising, it's important to seek out information from independent, unbiased sources, and make sure you look into the risks and benefits objectively. Taking the time to conduct thorough research and becoming well-informed can help to mitigate a number of problems right from the start. Here are a few questions you should ask yourself before you embark on this journey.

Do you know what you're in for?

First and foremost, make sure you have realistic expectations. Franchises are a business in a box, and you're buying into an already-successful business model, but that doesn't mean that it's going to be all smooth sailing, and it certainly doesn't imply that it will be easy. In order for your franchise to be a success, you're going to have to put just as much work into the venture as you would when starting an independent business. Make sure you're willing to put in the time and effort before you start.

Are you willing to follow the system?

Franchises are systems-based businesses, and in order to find success as a franchisee, you have to be prepared to stick with the system. "If franchises didn't have rules, they wouldn't be franchises; they'd be independent small businesses," says Joel Labava. The very essence of a franchise is consistency. If you're not happy to follow someone else's blueprint, you may be better suited to a different type of venture.

Related: The Basics of Buying a Franchise

Are you a people person?

Do you work well with others? Franchising means spending a significant amount of time interacting with your franchisor, fellow franchisees, customers, employees, and vendors, and great interpersonal skills are a requirement. If you find dealing with others to be drudgery and don't have a track record of great relationships, you'll want to pass on being a franchise owner.

Can you afford it?

Buying a franchise because you need a job is one of the worst reasons to start a franchise. Franchises are expensive, and require a significant amount of funding up front before you can get started. You'll have to cover the start-up costs, and have enough capital to fall back on until the franchise begins to make a profit. In many cases, this is at least a year. You'll want to make sure you have enough reserves to cover operating costs, and living expenses during this time.

Will you enjoy it?

Finally, the all-important question; are you sure that owning a franchisee is something that you'll genuinely enjoy? While being a franchisee can be a great opportunity for some people, for others, it's a terrible idea. Most franchise contracts run five to ten years; that's a long time to be locked into a job that you hate. If you don't relish the thought of following someone else's system, and immersing yourself full-time into running a business, franchising isn't for you.

Still think you have what it takes to be a franchisee? Great! Before you dive in though, you'll want to make sure you've learned everything you can about franchising, and thoroughly understand what you're getting into. Here are a few resources you'll want to check out.

Related: Franchise Your Business in 7 Steps

The franchise king

The Franchise King, Joel Libava offers great advice to would-be franchisers and is a must-stop site if you're trying to decide if franchising's right for you. Libava runs a blog, and he's is the author of the helpful book Become a Franchise Owner!. He also offers franchise consultations in case you'd like further guidance.

International Franchise Organization

The International Franchise Organization (IFO) is another great resource for those who are interested in owning a franchise. Their About section contains a number of informative articles covering everything from the advantages and disadvantages of owning a franchise, to advice on investigating your options.

Franchise Euphoria

Franchise Euphoria is an excellent podcast, covering a range of topics of interest. Join Josh Brown, franchise lawyer and entrepreneur as he helps entrepreneurs and business owners start, grow and build profitable businesses.

Franchising can be an amazing opportunity, but it certainly isn't for everyone. Before taking the leap make sure you've thoroughly researched every nuance of this business model, and aren't operating under the persuasion of an over-eager seller, or buying into any hype. At its core, franchising can be a great way to capitalize on a need in the market, and is ideal for those who want to enjoy running their own business, without spending the time and pain of trying to grow a company on their own. Just make sure you're realistic in your expectations, and confident that franchising is the best option for you.

Are you considering franchising? Is it a business model that interests you?
Brenton Hayden

Founder of Renters Warehouse

Brenton Hayden is the founder and chairman of the board of Renters Warehouse. A Harvard Business School and MIT Sloan School of Business graduate, Hayden leads a team of over 140 employees and franchises in 21 states with a portfolio of managed properties valued at just under $1 billion.

Related Topics

Editor's Pick

This 61-Year-Old Grandma Who Made $35,000 in the Medical Field Now Earns 7 Figures in Retirement
A 'Quiet Promotion' Will Cost You a Lot — Use This Expert's 4-Step Strategy to Avoid It
3 Red Flags on Your LinkedIn Profile That Scare Clients Away
'Everyone Is Freaking Out.' What's Going On With Silicon Valley Bank? Federal Government Takes Control.

How to Detect a Liar in Seconds Using Nonverbal Communication

There are many ways to understand if someone is not honest with you. The following signs do not even require words and are all nonverbal queues.

Business News

Carnival Cruise Wants Passengers to Have Fun in the Sun — But Do This, and You'll Get Burned With a New $500 Fee

The cruise line's updated contract follows a spate of unruly guest behavior across the tourism industry.

Business News

Amtrak Introduces 'Night Owl' Prices With Some Routes As Low As $5

The new discounts apply to some rides between Washington D.C. and New York City.

Business News

Meta Employees Interrogate Mark Zuckerberg in Town Hall Meeting

The CEO fielded tough questions from rattled staffers at an all-hands meeting.

Business News

A Laid-Off Meta Employee Says She Wasn't Given Anything to Do: 'You Had to Fight to Find Work'

Claims about the company laying off thousands of employees who didn't have real jobs have been discussed online.

Business Solutions

This Highly Rated App Could Help Business Owners Stay Organized

Get your business in order with this personal organizer app on sale for $60.