Have you been thinking about starting a business that can sustain you without getting yourself into a lot of risks? Well, franchising could be for you.
“Franchising” is a form of business where the Franchiser, who owns a trademark, good and/or service, authorizes the Franchisee to invest, market and/or distribute this trademark, good and/or service, for a specific period of time, in exchange for a specified payment structure.
Franchising means working for yourself, but not by yourself! Thus, the success of a brand reckons upon the ongoing partnership between the Franchisor and the Franchisee.
Taking a business model and brand that have already proved their success, or that you love and turning it into a self-sustaining business seems like a great idea. But even through franchising might be less risky than starting up your own business and brand from scratch, you need to do a lot of research and planning to ensure its success.
We aim to highlight to you the key things that you need to consider before you jump into franchising.
So let’s get going!
Franchises could be either:
- Product distribution franchise; which sells the large product(s) manufactured by the Franchisor
- Business format franchise; which sells the entire business format including trademark, product, service, business approach, and methodology.
Based on your interests, skills, expertise, market landscape, business model, financial status, and profitability success level identify your start-up costs, working capital, and funding options, estimate your profit potential, and make certain that you can afford the entire business venture.
You also need to consider if you are going to put your whole time and effort into it so that it covers your salary or if you are doing this as a passive income
Franchising success depends on the following points:
Research the franchise of choice
Research the business franchise you are considering to purchase. Seek out your chosen franchise and contact their owners. Their experience and knowledge give you first-hand knowledge, key insights and a realistic picture of what entails in owning a franchise. Investigate the franchisor’s background & strength, and identifying the past & current franchisees’ success rate, not only in the region but also around the world. You don’t want to invest in a franchise that lacks experience and expertise, but with detailed information, you can make a better-informed decision.
The start-up costs for franchises can vary depending on the type of franchise chosen. However, despite the capability of buying a franchise, you should also consider whether you are also able to cover the costs of operating until the business starts to make a profit. Therefore, you need to calculate your financial capabilities properly. If you are serious about taking on a franchise select a realistic above-average profitable franchise and take into account the ability to financially weather unexpected situations and slow sales periods. Avoid buying a franchise that competes with your business, or one that requires a huge initial financial investment!
Management skills and planning
Owning your own business does not mean you get to sit back or rev up your leisure time. Be serious! Don’t expect your employees to run the show alone. You need to get your hands dirty and lead your team efficiently and effectively to deliver your set goals and objectives. Setting both short-term and long-term goals is key to achieving these goals and objectives and one that fosters a committed and motivated workplace environment. With proper (business) plans in place, you will have a set-out path to reaching your objectives, and thus will be able to measure your franchise’s performance at the different set intervals.
Franchise location and marketing
Find a suitable cost-effective location, launch smart marketing and advertising campaigns, and plan creatively for your franchise’s growth. Location can be one of the key factors to the success of a franchise. A great franchise, if opened in a poor area, can minimize your chances of making a profit. If the customer base is small, then this can negatively impact your great franchise venture and in turn, cause you a great loss. Therefore, it is crucial to assess your target customer’s demographics for the franchise. Furthermore, you want to detract from setting up your franchise location that directly impedes the success of your new venture, especially if your franchise does not offer a competitive advantage. Get involved with your community and network with business professionals, friends, and family to further increase the growth of your franchising venture.
Importance of great employees and customer service excellence
Without great employees, your business, no matter how much money you invest, can lead to the demise of your venture almost instantaneously. Your employees are basically the forefront of the business and are essentially the lifeline of the business. Provide proper support and training, as well as providing an atmosphere in which employees feel appreciated. In addition, you should also focus on giving your customers the best experience. The ultimate goal is for your customers to return and provide you with more business. Invest in added value promotions and offers that give the customer further incentives to return. It may be easy to generate sales via promotions, however, it is ‘another ball game’ when it comes to keeping your customers ‘hooked’ on your products and services.
Never go in head-on without a clear and realistic plan. Assess your readiness for a franchise, prepare the franchise legal and supporting documents, and get your infrastructure ready for franchising. Based on your interests, skills, expertise, market landscape, business model, financial status, and profitability success level; identify your start-up costs, working capital, and funding options. Estimate your profit potential and make certain that you can afford the entire business venture!
Whatever type of business you choose to conduct, it is never an easy task. That goes the same for franchising; it’s definitely not a quick-get-rich scheme. Business ownership comes with many perks and pitfalls; however, owning your own business must be something that you truly desire within. Initially, the decision to take on a franchising business can often feel overwhelming; you’re basically going to put in all your sweat and money to take on your new business venture.