Should I Buy A Franchise? 5 Pros and Cons You MUST Know

Summary

In this informative video, franchise owner Tarick Johnson candidly discusses the critical factors to consider before investing in a franchise. He outlines the importance of understanding one's motivations, financial requirements, the decision between new and existing locations, personal suitability for franchising, adherence to the franchise system, and the necessity of planning an exit strategy. With insights from his experience owning two franchise locations and working with clients as a financial advisor, Johnson provides a comprehensive guide for aspiring franchisees.

Takeaways

• 📈 In 2018, franchises generated over 760 billion dollars in sales and employed over 8 million people, highlighting the significant economic impact of franchises.
• 💡 Tarick Johnson, the speaker, owns two franchise locations and aims to provide an honest discussion about the considerations of buying a franchise.
• 🤔 The decision to buy a franchise should be based on clear personal objectives, such as replacing full-time income, creating an additional income stream, or building wealth.
• 💰 The average franchise costs about 250,000 dollars to start, with a wide range depending on the brand, and financial requirements vary from as low as 10,000 dollars to millions.
• 🏪 Buying an existing franchise location can be less risky as it often comes with an established customer base and proven profitability.
• 🚀 Tarick emphasizes the importance of due diligence when selecting a franchise company, including thorough research and asking the right questions.
• 👤 Success in a franchise is heavily dependent on the individual's skills, decision-making abilities, and willingness to follow the system.
• 🛠 The speaker stresses the importance of being able to handle disruptions to lifestyle and being prepared for the challenges and sacrifices that come with owning a business.
• 📝 Following the franchise system is crucial; those who prefer to operate independently might be better suited to starting their own business rather than buying a franchise.
• 🔄 An exit strategy should be considered from the outset, as it influences decisions made during the ownership and operation of the franchise.
• 🔍 Researching the resale value of franchises within the industry is important to understand potential returns and the feasibility of selling the business in the future.

Q & A

What is the significance of the year 2018 in the context of the video?

In 2018, there were over 750,000 franchise units that generated over 760 billion dollars in sales and employed over 8 million people, highlighting the scale and impact of the franchise industry.

Who is the speaker in the video and what is his background?

The speaker is Tarick Johnson, who owns two franchise locations that are 2400 miles apart. He has experience as a financial advisor and has worked with over a thousand clients, as well as being a speaker for Tony Robbins.

Why is it important to understand your 'why' before investing in a franchise?

Understanding your 'why' affects every decision you make in the franchise process, including the type of franchise to invest in, whether you'll be an absentee owner or active in the business, and the industry you'll get involved in.

What is the average cost to start a franchise?

The average franchise costs about $250,000 to get up and running, but this can vary widely from as low as $10,000 to millions of dollars, depending on the brand and type of franchise.

What are some potential risks associated with investing in a franchise?

Potential risks include investing in the wrong type of franchise, not running the business well, and losing a significant amount of money, including life savings, if the investment does not go well.

What is the difference between buying an existing franchise location and a new one?

An existing franchise location already has customers, sales, and is generating profit, which lowers the risk. A new location carries higher risk as it has no established customer base, staff, or operations.

What is the importance of following the franchise system?

Following the franchise system is crucial because it is the established process and brand identity that the franchisee is buying into. Not adhering to the system can lead to conflict with the franchisor and potential legal issues.

What should you consider when thinking about your exit strategy for a franchise?

Your exit strategy should consider your long-term goals, such as receiving an income for as long as possible, selling the business, passing it down to family, or how to handle the business if it's not going as planned.

How can owning a franchise disrupt your lifestyle?

Owning a franchise can disrupt your lifestyle due to the challenges and responsibilities that come with business ownership, such as dealing with unexpected issues like break-ins, managing staff, and handling the business operations.

What is the role of the franchisor in supporting existing franchisees?

The franchisor should support existing franchisees by focusing on increasing same-store sales, offering assistance and resources, and being open to new ideas from franchisees that can benefit the business.

What resources does Tarick Johnson offer to help potential franchise owners?

Tarick Johnson offers a free seven-step blueprint on how to become profitable in 60 days, which can be helpful for any type of business, and he also shares his learning experiences and mistakes made through his franchise ownership.