Life amidst the Covid Scare: How not to invest in a bad Franchise
In aquatic voyages, if a ship witnesses long periods of tranquility in the waters, it is usually a sign of imminent storms. Undeterred, the crew joins forces and sets out to meet and defeat the storm. But the preparation stage requires one highly important phase, i.e., which areas to stay away from.
The impending dullness in the market post the covid pandemic is nothing short of that warning. A storm is coming, and as any seasoned mariner will tell you, there are certain signs that you can be on the lookout for to determine whether or not is investing in a Franchise a bad decision for you.
Investing in a franchise may seem like an ideal decision to expand your revenue inflow, while not having to start from scratch. Franchise investments are a great resource for those who wish to leap into the realm of business, while not having to incur the risks of having to begin with a new concept. Investing in a trusted and well-recognized brand reduces the risk of loss and increases the possibilities of sustainability and profit.
However lucrative a brand franchise may seem, one must watch out for signs indicating that a franchise investment idea may not be worth your time and money. Here are some important signs to watch out for before you invest your major chunk into something not worth it.
1. Negative Reviews and Feedback
Making up your mind to invest in the right franchise could be a daunting task, but these days varied methods of reviews and feedback can help the investor in more than a single way. It is always good to check the reviews and feedback of a brand where word of mouth also plays a crucial role. Negative feedback about their quality, profitability, professionalism, etc could be a reg flag that must be considered as pivotal in deciding on an investment.
2. Antagonistic FDD Information
A successful firm shall always rely on the required paperwork and would ensure its upkeep. The Franchise Disclosure Document helps an investor decide whether to invest in the firm or not. This document also enables an investor to find discrepancies between what is told verbally by the franchise owner and what is mentioned on paper. In any case, the paper stands as the final verdict and hence any contradictions from the owner should be discussed if they only rely on verbal commitments then it is time you rethink your decision.
3. Immoderate Litigation
It is wise to not invest in a franchise if there have been a couple of lawsuits filed against them. However, the veracity of the exact needs to be checked if a firm files a lawsuit to defend its brand, it is a good sign. Acquiring such information from a legal expert would be beneficial and will avoid you from pooling your resources into a defaulter brand.
4. Financial stability and Sale pressure
One of the intrinsic pieces of information to gather before you invest is the financial stability of a firm. Many owners are looking at only financial assistance from a franchise deal to uplift themselves from a current situation and may not look at long-term goals or longevity. This attitude is not sustainable and poses doubt. An allied notion is to watch out for sale pressure from the firm. If they are too eager to make you sign the contract or are dwelling more on sales, it might be a dubious act. Profit orientation is not harmful but no one would invest in an existing brand which results in excessive pressure. A well-established brand need not be built under pressure and work on this model, as it may have its finances in place and will look for growth instead of survival.
Conclusion: Investing in an established brand is a wise decision to make, rather than learning the trade and starting with a fresh idea that may or may not relate to the market segments. However, one should be conscious and cautious while investing and must not get lured by the brand. An open mindset with some market research will facilitate better decision-making.