Top-3 Number-Crunching Questions to Ask Before Starting a Franchise Business

Dreaming of leaving the 9-to-5 drag, but unsure if you’ve got the money to make a franchise business work? In today’s post, the FranNet team reviews some empirical evidence in favour of the franchise business system, then shares the 3 most common number-crunching questions we received from prospective owners.

Why should I consider starting a franchise business?

Starting a franchise business might be one of the best ways to secure your family’s financial future with an impressive return on investment (ROI).

In a meta-analysis of existing empirical research and business reports, Duckett (2008) found that franchising was a reliable and risk-averse approach for entrepreneurs. His research reinforced what franchise business owners around the world already know: it’s easier to get to the top when you’re deploying proven business processes alongside highly motivated operators who are backed by the power of national branding campaigns (Duckett, 2008, p. 3).

As long as you do your research and find a quality brand - and make sure your finances are in order! -  signing on with a franchise will give you instant access to business assets that would otherwise take decades to develop on your own.

Top-3 Financial Questions for Prospective Franchise Business Owners

• How much startup capital will I need to get this franchise business off of the ground? One of the most attractive aspects of a franchise is the relatively low startup costs, but there is no universal “entry fee” to plan for. Instead, you’ll need to conduct research. Don’t settle for the information that the franchisor puts on their website. While requesting a free consultation from a franchisor can be a good starting point, be sure to cross-reference this information with data from unbiased sources. Browse business reviews, meet with unaffiliated franchise consultants, and speak with franchisees any chance you get.
  
• How much operating capital reserves will be needed to cover losses until I hit a breakeven point? You may not have customers on your first day of business, but you will have expenses. You’ll need to have a cash reserve to keep things afloat until revenue starts rolling in. Fortunately, this shouldn’t take long with a quality franchise business, as dedicated marketing departments will start to cultivate business in your territory from the moment you sign on, but that doesn’t change the fact that you need a reserve to bridge the gap between startup and success. Again, there is no stock answer we can provide without knowing more about you, but knowing this reserve is required is a step in the right direction. When in doubt, aim high; overestimating is always better than the alternative.
  
• What financing options exist for me? Don’t feel like you need to have the entire investment sitting in your bank before you pursue your dreams. There are many safe and reliable financing options out there, whether you decide to secure an open line of credit against your home equity or pursue a commercial lease. Don’t forget informal financing options, either: friends and family can work in a pinch, and are usually much more forgiving on interest rates than the banks!

We’ve only scratched the surface on franchise business financial questions - find more answers to your number-crunching queries at http://www.frannet.ca.

References

Duckett, B. (2008). Business format franchising: a strategic option for business growth-at home and abroad. Strategic Direction, 24(2), 3-4.

About FranNet Canada

FranNet is a 29-year-old company with roots in the U.S. Its purpose being to nurture every entrepreneur’s dream of business ownership. We actively employ a specific profiling and consultation method. This method is geared to each investor with a specific business model and based on franchise trends typically found in Toronto, Ontario, Vancouver, British Columbia, or Calgary, Alberta. The most lucrative Canadian franchise opportunities are waiting for you. For more details visit - http://frannet.ca/buy-a-franchise/canada-franchise-buying-process/