If you are looking to buy a franchise, learn how to identify what kind of branch is right for you with these five steps.
If you’re thinking of getting into the franchise game, it can be tempting to dive in head first and start going through specific brands to find the right opportunity for you. While that enthusiasm is commendable, it may be beneficial to take a step back and first think about what you’re looking for in a franchise system before you decide who you want to partner with.
To help you out, we’ve gathered five steps to take not just before you buy a franchise, but before you even start looking at specific brands. So, if you’re wondering how to buy a franchise, we encourage you to go through this exercise first. You can then use what you learn to guide your research and decision making when you start talking to franchise brands.
Five steps to take before you buy a franchise
No. 1: Determine costs
As you research how to buy a franchise, it’s important to find out how much you’re comfortable spending. Franchise costs vary across brands and typically fluctuate within each system based on what type of location you want to open. For example, The UPS Store franchise cost structure varies across three different types of centers based on location, type and size.
- Traditional locations range from $168,885 to $398,323
- Rural locations range from $166,659 to $309,045
- Store in store locations range from $58,248 to $230,160
*Prices subject to change
It’s important to note, however, that you don’t necessarily have to cover the full fee with cash in hand. The UPS Store franchise system only requires you to have $60,000 of the initial fee in liquid assets. You can use loans to cover the rest. And, The UPS Store also offers access to tools and financial assistance to help new owners cover initial expenses.
Due diligence is essential here; as you research opening a franchise business and start looking at specific brands, ask about startup fees and financial assistance options. More importantly, make sure the franchise brands you consider have a pricing structure that aligns with your investment tolerance.
No. 2: Determine your ideal system
In this step, don’t worry about identifying specific franchise brands. Instead, you may find it easier to back into a specific brand by first identifying characteristics that match your interests, values and skillset. Ask yourself questions like:
What am I passionate about?
Make sure you choose a franchise system that allows you to do work you’ll enjoy. Think of your answer to this question in broad terms. For example, if you love helping people, then look to partner with a brand that prioritizes customer service and one-on-one interaction with consumers.
What industry do I want to work in?
Next, get more specific and think about what type of products and services you want to provide. Do you want to help small business owners, serve food, cut hair, etc.?
Where do you want to work?
Do you love city life? Or, is a slower-paced, rural environment more to your liking? Find out what type of market aligns with your preferences. Then, as you research franchise brands, make sure they have available centers in a market that meets your needs.
No. 3: Decide what kind of business structure meets your needs
Again, identifying a specific brand here isn’t the goal. What you want to do is determine what business traits (e.g., name recognition, maturity, growth potential, etc.) are most important to you when opening a franchise business.
Do you want to go with an up-and-coming, newer brand? Or, would you prefer to work within the safety net of a well-established brand? There isn’t necessarily a right or wrong answer here, but there are some factors to consider. Newer franchise systems are often working through the growing pains and may not have set procedures and processes in place to help new franchise locations reach their full potential. On the other hand, established franchise brands have that stuff down, which can make it a lot easier for you to get your business up and running (and, ideally, turning stable profits) sooner.
Another consideration is the size of the franchise system. Do you want to find a small franchise to invest in (maybe 50 locations or less)? Or, would you prefer a larger system (hundreds or thousands of locations)? While there is some appeal of being a big fish in a small sea, larger location counts have their advantage. For example, at The UPS Store, we often hear from owners how advantageous it is to have an expansive network of owners you can reach out to for tips and advice for running your business.
“One of the most significant assets we have in the franchise model is the ability to network with other franchisees, visit their stores and find out how they're operating,” says The UPS Store multi-center owner Jay Patel. “It gives you more confidence as an owner to learn some of their best practices and incorporate them into the way you run your store.”
No. 4: Analyze your skills and experience
If you’re considering opening a franchise business, chances are you’re looking for a change from your current career, which means you might not have experience in your chosen industry. If you join an established franchise brand, that’s fine – as long as you go with a brand that offers plenty of training.
Even if you choose an industry that you have a lot of experience in, you’ll probably need a decent amount of training to learn the ins and outs of the specific business. As you research your options, ask each brand about the initial and ongoing training programs they offer.
The important thing here isn’t finding a brand in an industry you’re familiar with, it’s to understand what kind of learning curve you’ll have. So, make sure you approach each franchise opportunity with a clear understanding of your experiences, skills and opportunities to improve.
No. 5: Make sure there’s enough demand in your industry
Even if a brand is opening hundreds of new locations every year, it doesn’t mean they should. Whichever industry you choose to buy a franchise in, make sure there’s a healthy amount of consumer demand. This step is essential for finding a franchise brand with enough growth potential not just for your initial investment, but that can also support additional locations if you decide to branch out to more locations in the future.
Similarly, as you research specific brands, make sure they have a sound strategy for choosing which markets are suitable for new franchise locations. At The UPS Store, we consider a variety of factors to determine markets for new centers including metro population, external competition, presence of other nearby stores and potential traffic.