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Do you want to become a business owner, but are still waiting for lightning to strike with the next great idea? For some, a franchise could be a smart career move. When you purchase a franchise, you get a ready-made business model, along with training and marketing support.
In recent years, the economic track record for franchises has been strong. Franchise businesses grew at a faster rate than non-franchises business in 2016, according to the International Franchise Association.
There are always two sides to a coin and risks to every investment. With any major career and financial decision, it is wise to do your homework and look before you leap. Here are six factors to help you consider whether a franchise may be right for you.
Be open minded
You may be focused on a particular brand or type of work. Just because it's your hobby, doesn't mean it will be the most profitable business model. Look for a franchise that is a match for your skills, lifestyle and pocketbook.
Evaluate start-up costs
Franchise fees vary widely. You can find the estimated start-up costs for any franchise you are considering on the company's franchising page. For example, in the U.S., the franchise fee for Subway® is $15,000. But, total investment costs to open a Subway restaurant balloon to $116,000 - $263,000. Remember, you might not start making money immediately. Estimate your path to profitability and ensure that you have enough in the bank to cover your living expenses until that time comes.
Are you willing to follow a formula?
Consider your personality to make sure the franchise approach to business ownership is a good fit.
If you open your own business, you get to make all the decisions from product development to the type of sign that hangs over your storefront. When you become a franchisee, there may be specific suppliers, branding and marketing guidelines that you'll be required to follow. To some, that is awesome – a guidebook to follow. Others, who enjoy thinking outside the box could bristle at franchise requirements. As a franchise owner, you will need to take someone else's methods and implement them. Consider your personality to make sure the franchise approach to business ownership is a good fit.
As you explore different franchise opportunities, consider the changing environment. The U.S. economy is undergoing a transformation as technology continues to disrupt many aspects of our lives. Brick and mortar retail stores are closing as buyers move online. Changing eating patterns are seen from a rise in Uber type delivery food to meal ingredients delivered in a box weekly for time-pressed two-income families. The gig economy is growing and outsourcing has become more popular. Do you believe the franchise you are considering will be relevant in ten or 20 years? The best franchise opportunities may be those that are highly adaptive to change.
Consider demographic trends
It is estimated that 10,000 Baby Boomers retire every day. There is an entire sector of franchise businesses that serve the needs of seniors. Millennials are a growing economic force and will become more dominant in the years ahead, does the franchise business serve their needs?
Do your due diligence
Take your time, do your homework and ask a lot of questions. Dig deep into a franchise disclosure document. Look for the recent track record of success for the potential franchise opportunity you are considering. Research the company, the industry and the competition. Evaluate the market where you are considering opening a business. If it’s a retail business, are there locations available at reasonable prices? Is there a workforce available with the necessary skills? Examine your potential customer base – is it big enough to sustain your business?
Becoming a business owner has many challenges and many potential rewards. Going the franchise route can give entrepreneurs an extra layer of structure and support they might not have on their own.
No matter if you are an independent entrepreneur or a franchise owner you need to approach your finances as a professional. Many young firms use personal credit cards when they are starting out for business expenses. That can cause major headaches at tax time and make it difficult to separate personal from business spending.
Spending limits on business credit cards tend to be higher than on personal credit cards, which can help with large business purchases. Some business cards also offer free additional cards for employees – and allow you to set spending limits so you can enable spending, but maintain control.
Many business credit cards offer several valuable perks that you can use to grow your business. What are the rewards your business needs most?
Do you need to fund start-up costs?
Look for a 0% intro APR offer. The Blue Business℠ Plus Credit Card from American Express offers an introductory APR of 0% for 15 Months on purchases and balance transfers and then shifts to a rate of 12.24% - 20.24% Variable.
Does your business keep you in the air?
Look at cards that offer airline miles and perks. Capital One® Spark® Miles for Business offers one of the best sign-up bonuses right now. Earn a one-time bonus of 50,000 miles once you spend $4,500 on purchases within 3 months from account opening. Then, earn 2 miles per $1 on every purchase every day. Even better: the annual fee of $59 is waived for the first year. Centralize your business spending on one card to quickly build up miles that can take your business far.
Looking for extra cash to funnel back into your business?
The Capital One® Spark® Cash for Business has the best sign-up bonus offer with a one-time $500 cash bonus once you spend $4,500 on purchases within 3 months from account opening. Then earn 2% cash back on all purchases, with no limit.