Five Questions to Ask Yourself Before Owning a Business
There are many exciting business opportunities in Canada – especially in the franchise sector. But many would-be franchisees get so caught up in the excitement of buying a business, that they may fail to ask several key questions before they take the plunge. Some will even purchase the business simply because they like the product. And while it’s important to believe in what you are selling, there is much more to franchise ownership and buying a business.
As you research Canadian franchise business opportunities, take some time to ask yourself the following five questions.
- What is the consumer demand like for this product or service?
There are certain products and services that seem to always be in demand, while there are others that follow trends or are influenced by the economy. It’s not necessarily wrong to follow a trend – but it’s important to do some projecting about the long term growth as well. Also, do a bit of research and find out what kind of competition you can expect and determine whether you feel confident that you can outshine your competition.
- How is the franchisor’s track record?
Just because you like a product doesn’t mean that the business or business model will be right for you. Take some time to find out what the franchisor’s track record is like. How is their reputation among other franchisees? What is their turnover like compared to others in the same industry? And don’t be afraid to speak with some other franchisees about their experience before buying a business from the franchisor.
- Are you happy with the legal agreement?
Before you sign any contracts, it is vital that you ask yourself whether you are comfortable with the proposed legal agreement between you and the franchisor. Have your lawyer go over the details to ensure that everything is fair and makes sense.
Make sure that you understand and are comfortable with the terms and that they take into account the inevitable challenges of running a business. You should not feel pressured to sign before you are absolutely confident. If you are feeling pressured, you might want to take this as a red flag.
- Can the franchisor provide the support that you need?
One of the big advantages of purchasing a franchise over other types of business is the support, marketing and trainer that you will be provided by head office. You’ll want to choose a franchise that has a strong financial position and that you trust will still be in business years from now.
Other areas to look at is whether or not the franchisor owns the property or is willing go on the head lease and how they conduct their market research Take some time to learn about the franchisor’s future plans for expansion and whether or not you can expect exclusivity in your territory.
Knowing exactly what your franchise fee covers and what it doesn’t along with whether they can provide financial assistance will help you in determining whether buying this particular business is the right choice for you.
- How are franchisees chosen?
Ok, so the franchisor is interested in having you buy a business - that’s great news! But have you taken the time to find out why they are interested in you? Are they looking for people with a certain background or skillset? Or are they simply looking for anyone who can make the down payment?
The better franchisors have a good idea of the kind of person they would like as a franchisee. They set up this profile because they know the types of people that are most likely to succeed. Find out what their criteria is or if there is a specific kind of person that they recruit.
While you’re at it, find out what additional training might be required once you are accepted as a franchisee. If you feel that you fit this profile, you’ll have more confidence in buying the business.
