Many new and seasoned entrepreneurs jump at the chance to invest in an interesting and lucrative franchise. This is because there is less risk involved since the corporate owner has already ironed out the kinks for you.
Buying a franchise can be one of the most challenging yet rewarding things you can do as an entrepreneur. However, as with investing in anything, there is still an element of danger involved in the process. The following are just some of the requirements you need to mitigate the risk that naturally accompanies any business, while also securing your success as much as possible.
Franchise brokers
Franchise brokers are also known as business coaches, advisors, and franchise consultants. They are invaluable resources for helping you navigate the world of franchising to make sure that you’re paired up with a franchise that is right for you. Buying a franchise business is an investment that carries with it a certain amount of risk. Working with a broker might not remove that risk, but it can certainly help minimize it.
Credit score
Minimum credit scores may vary according to the franchisor you’re thinking of working with, but generally, having a score of 680 or higher is ideal.
Net worth
Almost all franchises require an initial investment before buying, and the sums of which are quite large. You’ll need a high net worth to qualify. A net worth of around $250,000 or higher is the standard among most franchises.
Income
You should be able to prove that you have other forms of income and resources to help cover your living expenses while you’re working to get the franchise off the ground. The numbers vary per franchise, but in general, you should have an average income of $60,000 or higher.
Cash on hand
Many franchises may ask you to cover the franchise costs or cover a down payment if you’ll be the one financing the purchase. It’s important that you have enough cash on hand to pay for the cost of these requirements, as well as any emergency expenditures that might arise.
Industry experience
Not all franchises require business, corporate management, or any industry-related experiences, but it does help your case significantly. Franchisors respond better and will be more confident in your abilities if you have the relevant experience to back it up. You should also have an IRA or 401K retirement plan for added security.
Management experience
While experience in the industry of your chosen franchise is not necessarily required, management experience is. Your primary responsibility as a franchisee is to lead a team and manage a business. If you aren’t sure how to do them, and if you lack significant management experience, it could be a sign that your business might not succeed. You can take classes on the subject or work your way up to a managerial job first before you decide to invest in a franchise.
Furthermore, you should be between 35 and 55 years old and you should not have owned a business once before. Each franchise is different, and they’ll have their own requirements when it comes to allowing you to buy their franchise. It’s important to have most of what is mentioned on this list if you want to be considered and qualified to buy it.
