Considering Buying a Franchise with Your Spouse? 4 Factors to Evaluate

In many cases, owning a franchise or any other type of business with a partner is a very wise decision. While there's something to be said for being completely independent, having the support, understanding and help of someone else can also be a significant asset.

When it comes to business partners, some people go out in search of new ones before getting involved in a specific business. Others work with the same partner they've launched and built other successful businesses with. And for a certain group of future business owners, their interest lies in running their future business with their spouse.

It wouldn't be hard to fill up a book with jokes about working with your spouse. But all kidding aside, this arrangement has worked very well for plenty of married couples. So if it's something you're seriously considering, here are the key factors you need to take into consideration:

Interests and Skills

The reason that "opposites attract" is such a prevalent saying is because it's true. And when it comes to business, that can be a good thing. For example, if you excel at sales but not details, having a spouse who's got a keen eye for financial details can be a significant asset for the franchise you purchase. On the other hand, if you both have extremely strong opinions about the same issues, working together could result in you spending more time clashing than actually taking actions that help the business to grow.

Both Ready to Work

If you and your spouse are seriously thinking about purchasing a franchise together, it's important that you're both at a point in your life where you can devote your full attention to the business. Whether it's with a spouse or anyone else, one of the most common reasons partnerships fail is because one person is putting more of their energy towards the business. This inevitably leads to that partner resenting the other and ultimately pushing for the partnership to be dissolved.

Separation of Personal and Professional

While spouses who run franchises together don't need to hide the fact that they're married, it's also not necessary for them to engage in public displays of affection in front of clients or employees. The same is true for fighting about issues related to the business. In order for spouses to be successful, they need to have clear boundaries between their personal and professionals lives.

Have Ways to Spend Time Apart

Just because you work with your spouse doesn't mean you should spend 24 hours a day together. In order to maintain the right balance, you need to find opportunities to be apart. Thanks to all the technology that's available, plenty of married couples who run franchises together do so from different locations. Because digital sharing is so easy, someone can work at home and the other at an office without any loss of productivity.

At the end of the day, only you can decide whether or not buying a franchise with your spouse is a good idea. While this is definitely a big decision, as long you as you apply the same scrutiny and objectiveness that you would with any other potential business partner, you'll ultimately make the right decision.

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Can You Use Your 401(k) to Buy a Franchise?

If you're thinking about buying a franchise, one of the key considerations you have to make is how you're going to finance it. For some potential franchisees, the answer to that question is to use cash they earn from a liquidity event like selling a piece of property. For others, the option they choose is to get a loan.

Since each financing option comes with its own set of pros and cons, the most important thing is to explore all of the options that are available. And during the course of that research, one of the options you'll discover is using your 401(k). Because it is possible to use this source of financing to purchase a franchise, you may be wondering if it's a smart option.

To help answer that question, let's take a look at some of the benefits of utilizing this financing option:

Don't Have to Take on Debt

While a loan secured at a favorable rate can be appealing, it still requires you to pay back what you borrow. When you use your 401(k) to finance your franchise purchase, you won't have to worry about owing money to a lender.

Avoid Risking Personal Assets

With many loans, people put up assets like their homes as collateral. Even with a solid plan, this can still create a risky situation. By using your 401(k) instead, you'll be able to eliminate that source of risk.

Increase What Can Be Reinvested

Whether it's a franchise or a business someone starts on their own, any business that's started with the help of a loan is going to have to make repayments on a monthly or quarterly basis. Since those payments can take up a significant amount of the money that a business is generating, it can reduce how much an owner is able to put back in the business. So by utilizing a source of financing that doesn't require any repayments, more of the money generated by the business can be put back into it.

How Can You Use Your 401(k) to Start a Franchise?

Now that we've covered the reasons that a 401(k) can work well as a source of funding for a franchise, you may be wondering what steps you need to follow in order to actually utilize it. Thanks to legislation that was passed in 1974, this process is actually easier than most people expect. The first step is for a new C corporation to be formed. Next, the newly formed company can sponsor the 401(k) plan. After that, the new 401(k) plan will be able to purchase stock in the corporation, which can then purchase a franchise. Finally, any existing retirement funds can be rolled into the new 401(k).

Since purchasing a franchise, as well as using any percentage of your 401(k), are significant decisions, be sure to speak with a trusted financial advisor before finalizing anything.

If you think you are ready to learn more about starting a franchise, and want to look into a House Doctors franchise, click here:

How to Perform Due Diligence During Your Search for the Right Franchise

As with any investment, it's important to do your research before making any type of financial commitment. The best place to start is by obtaining a franchisor's disclosure document. This document can also be referred to as a Franchise Offering Circular. While you can ask for this document at any time, the FTC specifically requires that you receive it at least ten business days before you're explicitly asked to pay any money or sign a contract.

When you do get the disclosure document, it's important to take your time and actually read the whole thing. If you encounter any provisions that you don't fully understand, be sure to bring it to the attention of a legal or other advisor who can clarify it for you. While it's always a good idea to review this type of document with a qualified professional, here are some details that will help you make sense of exactly what you're reading in this document:

Business Background

One of the basic components of a disclosure document is it will give you details about the past experience of the organization's executives. The important thing to keep in mind is not just the team's business experience, but how much experience they have with franchises. The other key factor is that a team with proven experience is going to be significantly less risky than a new franchise with an inexperienced management team.

Previous Litigation and Bankruptcy

Whether it's felony fraud or a civil action related to the franchise, you'll be able to find out if the franchise has a history of litigation. While there may be reasonable explanations for certain types of litigation, the presence of these issues can raise a red flag. The same is true if a franchisor or any members of its executive team have been involved in filing for bankruptcy.

Detailed Costs

One of the most common concerns people have about getting involved with a franchise is how much it's going to cost them. While it's not hard to find ballpark estimates online for how much different franchises cost, it's much more reassuring to get a detailed breakdown of exactly how much you'll be required to pay and for what. Fortunately, a franchisor's disclosure document provides that exact information. You'll be able to find out about all required and potential costs, including ongoing royalty payments, advertising payments, operating licenses, real estate improvements, training, legal fees, accounting advice, insurance and employee salaries.

Restrictions

While restrictions on suppliers, services, customers and territory are fairly common with franchises, it's important to really dive into the specifics to find out if there's any cause for concern that one or more restrictions may hinder the ability of your business to flourish.

Making the decision to invest in a franchise is a big step. Although there's at least some degree of risk with every type of investment, as long as you take the time to perform your due diligence and make the most of all the resources that are at your disposable, you will be able to find the franchise that's the right fit for your financial goals.

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What Makes a Great Franchise Opportunity?

As with any investment, it's important for the specific franchise you choose to be the right fit with your goals. In order to determine if a franchise is the right opportunity for you, it's crucial to evaluate a variety of factors. Some of the most significant factors are demand, competition and your personal abilities, as well as several others. To help you gain insight into what makes a franchise truly appealing, let's take a closer look at each of those factors:

Demand

In order for any business to succeed, there needs to be an existing demand for its products or services. While marketing can increase demand, you want there to already be people who are paying money for what the business offers. As you're analyzing demand, you'll want to see if it's consistent throughout the year, or if there are seasonal spikes. Keep in mind that spikes aren't necessarily a bad thing. Instead, you just need to be aware that those times of the year will be especially busy.

Competition

A common mistake made by people who are new to business is thinking that they should avoid entering a market with competitors. The reason that's a mistake is because the presence of competitors actually validates a market. That being said, it's important to carefully analyze the performance of any competitors, including both their strengths and weaknesses.

Your Own Ability

Different franchises require different things from their owners. For some franchises, the business operates as a one-person show. In that situation, you would have to be willing to work the front lines eight or more hours a day. For other franchises, you aren't the one performing the actual services. Instead, your role is to manage employees. A franchise that requires its owner to have this type role is ideal if you have past leadership experience.

Brand Strength

It's technically possible for a business to start selling franchises just a few years after the business gets started. While that's not necessarily a bad thing, it does lower the chances of the business having a strong brand. When you're evaluating opportunities, be sure to measure the strength of individual brands to help understand how much the name of the business brings to the table.

Support and Training

In addition to looking at the brand, you'll also want to investigate how much support and training you'll receive. When a franchise is to the point of having a well-developed system for components like marketing, it makes a world of difference in terms of getting your business up and running. Instead of having to learn a lot through trial and error, you'll be able to put your business on a proven path to success from the first day you start.

If you keep the above factors in mind during the process of evaluating franchise opportunities, you'll put yourself in the ideal position to make a decision that will put you on the path to professional fulfillment and financial independence.

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