Buying A Franchise

It seems only natural for someone starting a company to wander about how much they can make from that venture. When it comes to business, not much can be worse than the realization that all the hard work and sacrifice that goes into building a business is not producing the desired financial returns.

For someone who is shopping for a franchise, the answer to the question above brings some good and bad news.

The good news is that an ever growing number of franchises offer some sort of an earnings claim that should enable the buyer to get a general idea of a franchisors' average unit performance. Plus, the franchise candidate has complete access to all the current franchisees in the system and has the ability to directly interview them about their financials. The bad news is that, despite all the safety nets build into the idea of franchising, the candidate won't be able to completely remove significant element of risk from the transaction. Every concept that has been franchising for more than 10 years has had some failures in their system.

There are thousands of franchise options out there. Creation of a cash flow model, business plan, interviews of current and former franchisees and visits to the company headquarters are all necessary steps in the process. If a particular industry has been selected, being very conservative with the financial assumptions about the business. Creating a contingency fund is very important. Keep in mind that the majority of new businesses fail because they run out of cash.

In the end, in order to make the most out of franchise business, the candidates have to believe in themselves. Naturally, not every franchise is successful and makes its owners money. The key to finding out how much money can be made is to invest the time to understand the details.