Step 1: Fix your budget
Write down how much money you can put in without borrowing from family or a moneylender. Then add the cash you need to live on for the first six to twelve months.
Never spend your whole savings on the franchise. Keep a cushion. Most new shops take time to cover their costs.
Step 2: Check space and location
Every brand has a minimum shop size and needs a certain kind of road or market. Check whether you own the space or must rent it, and what the rent is.
Stand near the site at different hours for a few days. Count the people who pass and the ones who stop. Ask nearby shopkeepers about business.
Step 3: Match it to your skills
Ask yourself if you can do this work every day. Selling food, running a school centre and selling machines need different skills.
Check if you will run the outlet yourself or hire a manager. A manager is a cost. Add the salary to your numbers.
Step 4: Work out the unit economics
Ask the brand for a written sample of monthly income and costs. Then make your own sheet with lower sales than they show.
Include rent, salary, power, royalty, marketing fee, loan instalment and wastage. Find out how many months it will take to get your money back if sales are low.
- Monthly sales you expect
- Cost of goods
- Fixed costs: rent, salary, power
- Royalty and marketing fee
- Loan instalment
- What is left for you
Step 5: Talk to existing franchisees
Do not speak only to the people the brand introduces. Ask for a full list of outlets and call several at random. Include some that closed or changed hands.
Ask them if the sales match what the brand promised. Ask about delays in supply, support and any hidden charges.
Step 6: Visit outlets
Visit at least three running outlets in towns like yours. Sit there for an hour. Watch the customers. Look at the stock and the state of the shop.
Also visit the brand's office or factory. Meet the people who will support you.
Step 7: Decide slowly
Compare at least three brands in the same field. Never pay a token amount only because the offer ends today. A good brand will give you time.
Show the agreement to a lawyer and the numbers to a CA before you sign.