Thinking about investing in another franchise? Buying a second franchise unit can open up an exciting array of new opportunities, as well as increased income potential. But deciding to get involved in running multiple franchises is a big step, so there are a few questions you’ll need to ask yourself to make sure you’re ready for the task…
Investing in another franchise is likely to induce the same feelings of excitement and nervousness you experienced when launching your first one. Although the best franchises encourage their franchisees to grow their business networks, buying a second franchise unit too early could be detrimental to your finances, reputation and health.
Often, it can be difficult to decide to push ahead with franchise expansion. To work out whether you’re ready to take the plunge, ask yourself these five key questions.
Ask yourself these questions before investing in another franchise
1. Is it the right time for me to prioritise franchise expansion?
When it comes to running a franchise unit successfully, timing is everything. You need to make sure you’re ready to go from managing a single franchise unit to multiple locations, and pick the right moment, from both a professional and personal perspective.
If the timing is wrong for your business, your franchise expansion will be hampered from day one. Think about how well your unit is performing, and whether you expect to come up against any significant challenges in the near future.
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If you grow before your current business starts operating successfully, buying more units will only add to your problems. You’ll have even less time to spend on each unit, and you could end up running two businesses with average or sub-par performance figures. But, if you’ve reached the point where you can take a backseat, or leave most of the day-to-day tasks to your employees, you could be ready for a new venture.
Also, buying another franchise business will put additional strain on your time and your emotions. So, you should consider how expanding your portfolio will affect you and your loved ones, rather than just viewing it as a business transaction. Even the most talented franchisees in the most successful brands can fail if they don’t have support from friends and family.
2. Can my current business survive when I’m not there?
Have you ever stopped to wonder whether the success of your current franchise relies solely on you? Your knowledge, skillset, work ethic and personality have probably played a significant role in the growth of your business. So, it’s worth thinking about how your unit would perform on a day-to-day basis when you’re busy, and how easily you could delegate tasks to employees.
Before you buy another franchise business, it’s a good idea to spend time passing on your know-how to your staff. The sooner you share some of your secrets to success and help them develop their own skills and confidence, the sooner you'll be able to grow your business empire.
3. Have I got the right people in place?
As a franchisee, your employees are your greatest asset. But if your working relationships aren’t based on trust and openness, staff members might struggle to make the right decisions for your business while you’re away.
Also, if you find it difficult to delegate tasks or hand over control to your employees, you may want to think twice about opening another unit. As you expand your franchise portfolio, you must have faith in your employees and their ability to carry out the roles involved in running your business.
Before you agree to invest in another franchise unit, make sure you’re ready to delegate and your team is prepared to step up and take more responsibility. If neither of these elements are in place, you're not ready to become a multi-unit franchisee just yet.
4. Can I afford to buy a second franchise business?
Business growth is great, but sometimes you have to walk away from fantastic opportunities if you don’t have the money to fund them.
Whether you spend all your savings or take out an unaffordable loan, stretching yourself financially can put a real strain on both your professional and personal life. Ultimately, deciding to expand when you're not in an economically stable position will only lead to problems further down the line.
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Before you make any investments, you should always consult an accountant or financial advisor with experience in the franchise industry. They’ll be able to tell you whether you can comfortably afford to grow your business. Remember, the best franchisors understand the importance of financial stability and won’t encourage you to put yourself in a vulnerable position.
5. Am I just coming up with excuses not to expand?
Sometimes, it can be hard to step into unfamiliar territory - even if you’ve done all the preparation. When it comes to running multiple franchises, there’s a fine line between taking on a reasonable amount of risk and being completely unrealistic in your attitude and expectations. If you think you’re stalling, try to work out where you sit on the scale, and whether your reasons to postpone growth are legitimate.
Due diligence is a vital part of any investment process, but you may miss a great opportunity if you overthink your growth plans. If your business is performing well, you’ve done your homework and you’re ready for a new challenge, it’s probably the right time to become a multi-unit franchisee.
Investing in another franchise
We have lots of handy resources for franchisees planning on investing in another franchise. Take a look at our other useful business guides or use the search box to find more franchise-related articles.
Alice Tuffery, Point Franchise ©