Many people dream about owning their own business. More and more people are choosing franchising as the avenue to to pursue these dreams.
The Federal Trade Commission (FTC) has excellent information in its consumer guide for buying a franchise. The FTC recommends that BEFORE you invest in or select a franchise you should think about how much money you have to invest, your abilities, and your goals. The guide warns you to "be brutally honest." Three key areas are listed:
1. Your Investment - How much do you have to invest? How much could you afford to lose? Do you need financing? What's your credit score? Do you intend to invest with partners? How much do you have in savings?
2. Your Abilities - Does the franchise require special education, expertise or training? What skill sets do you bring specifically to this business?
3. Your Goals - Do you need a specific annual income? Do you have interest in a particular field? Are you interested in retail or service? How many hours can or will you work? Do you intend to hire a manager or run the business? Is this a primary source or supplement to income? Do you get bored easy or are you in it for the long run? Would you like to own multiple locations?
One of the biggest questions to ask yourself in my view is whether you are just buying yourself a job. If you buy a franchise you should treat it like an investment and expect a return on that investment. Otherwise, you are most likely better off just looking for employment. It's certainly less risky and considerably less stressful.
In the next post we will examine what it means to "buy yourself a job" and how to avoid that trap.