Evaluating New Franchises
Franchising is a quintessential way of life for American business. Our entrepreneurial spirit and broad-reaching conceptual ideas often lead to exciting new business models. Since franchising is a large portion of all privately owned businesses, and nearly half of all franchise brands are fewer than five years old, you will discover hundreds of younger franchises to buy.
Fresh and first-to-market brands offer significant upside for those who are first to invest in their franchises. If you buy early and the brand does well, you will reap exceptional profits, often for much lower start-up costs. Naturally, there is a downside risk to emerging brands, too. But with a bit of research and evaluation, you can evaluate which new franchise to buy.
Franchising is a unique niche when it comes to accounting. Not every accountant understands the reporting methodology required of franchisors. Of course, you will review the financials of any business you consider but be sure to engage the expertise of a franchise accountant.
For an emerging brand, this is especially important to determine how the franchisor has used franchise fees and if any other early franchisees are doing well. If they are making money, you will see that. If they are not yet profitable, the new brand may create more financial risk than you can tolerate.
Even if you may take on more responsibility with a newer franchise concept, the franchisor’s support is always critical in the early months of ownership. A new franchisor should already have guidelines, training materials, and support documents at the ready. If you have managed a business operation previously, you will be better able to see gaps and strengths in the support plans and determine how much assistance is likely to be there (or not).
As you can see, a lot goes into consideration when purchasing a franchise. If you’re considering starting a franchise in windows and doors, reach out to us at Shield BP today!