What to consider before taking up a franchise business
Franchises are a fast-growing business model and there are hundreds of them all over the world. In fact, 83% of US-based restaurants and cafés are franchises. However, there are only a few benefits to choosing a franchise. Maybe you’ve decided to go the franchise route because you want to start a business by earning a steady income without having to take big financial risks. Maybe you’ve decided to become a franchisee because you want an opportunity to work for someone else but want to have the autonomy to run your business as you see fit. Whatever the reason, know that several other considerations must be taken into account before you choose to franchise.
Franchising is a system where the brand owner maintains a large network of outlets where the franchisee is permitted to operate but is bound to follow the parent company’s general rules and guidelines.
Franchises are a tried and tested way for businesses to expand. The beauty of franchising is that it can be tailored to suit the needs of any business. Some franchise businesses require little to no investment or effort to get started. What you must bear in mind is that there will be no guarantee that your business won’t fail, and that, even in the best case, the success of a franchise will depend on the marketability of its product.
Before you decide to take up a franchise business, there are some important things you need to put into consideration:
How much will it cost?
One of the most important factors in deciding upon a franchise is to find out its cost. At this point, it’d help to have your budget ready. Initially, you can set aside part of your savings for franchise investment but it doesn’t mean that you should forget about other aspects such as opening a bank checking or savings account and/or buying a house or property. What’s more, you should develop a clear plan on how you’re going to constructively spend your time establishing and running the business.
What are you good at, and what are you passionate about?
There are quite a few factors to consider before you take on a franchise. A franchisor wants you to have a solid business acumen because otherwise, you won’t understand the model and reproduce it successfully. Most importantly, they need someone passionate about that particular market and product or service; they’ll quickly sift out when potential franchisees aren’t fully committed. This is why it’s so important to find your passion because since it’s something that excites you, then deciding to take up the opportunity should be an easy choice.
How much time do you need to invest?
First-time franchisees take two years to get up and running, but that timeframe can differ depending on the business. It will take a considerable amount of time starting from researching potential franchise opportunities, legal documents, start-up costs for marketing and equipment and working out your business plan. This is assuming you already know how to do all those things that are necessary for running a successful business.
What is the franchisor like?
It is important to have a firm grasp of the type of character that would undertake the establishment and day-to-day running of the franchise. The franchisor must be a good role model for you to follow but also someone you can trust to guide you through the process. Before you consider becoming a franchisee, you need to make sure you have carefully investigated every aspect of the business, so you know if that particular franchise is right for you and whether or not it’s worth pursuing.
What kind of help does the franchisor provide?
Franchisors are definitely a necessity to open and operate a franchise. They provide everything including the initial training, ongoing support, secret recipes, financial assistance, merchandise connection and more. They assist with setting up your marketing strategy and help with any advertising issues that arise. The franchisor will also teach you how to run the business for success; since this is your money on the line they provide all necessary resources to make sure you have every opportunity to succeed. It is essential to know the kind of help the franchisor provide before taking up the franchise opportunity.
What’s your end game?
One of the major benefits of franchising over other types of small business ownership is that you can enjoy the support and assistance offered by a parent company. One thing that most new franchisees do not give enough thought to, however, is what they are going to do when they eventually leave their business. Even if you remain involved in your current franchise for several years, eventually you will want to sell your investment and retire. While there are no guarantees in life, it’s a good idea to have at least some plan about where you are going to go with your life when it comes time for you to leave behind your current profession and line of work.
What does it take to run a successful franchise?
To be successful in any franchise business, you have to learn about the company and its history first, then determine if your long-term goals coincide with that of the company. If they do, and the company is reputable within your industry, then you have found a win-win scenario that may work for both of you. Remember, it’s a more expensive option because of all the initial licensing fees associated with launching a new brand or product into the marketplace, but having that name behind your business can help generate new business from day one. A franchise can offer many benefits including marketing assistance, product placement discounts and shared services like advertising. However, it is also important to carefully research potential franchises so you know exactly what you will be getting for your money.
A franchise is a business concept where an independent business person or owner is authorized to offer products or services using an established and recognized trademark owned by another business.
Benefits of operating a franchise include access to a pre-established brand, operating structure, marketing and sales support and other resources from the franchisor.
You can use key performance indicators to determine the health and success of a franchise.