Here in Melbourne, there has been an enormous boost in the diversity of our food culture. We’ve had various chains of burger joints and Taiwanese drinks, all of which lure great volumes of customers. This had me thinking, should I open a franchise? Surely it is easier than starting a business from scratch?
The choice of companies to franchise is plentiful, but you should be aware that there are pros and cons. Just because a franchise is successful for others, does not guarantee success for you. There are a myriad of factors that play a part, such as timing, location, marketing efforts, quality, culture and more. To succeed, you still have to perform your due diligence to raise your odds of making it function.
Here are the seven things you need to know before you dive right into that franchise opportunity.
1. How much does it cost?
To get the ball moving, you need to understand the total investment required to acquire your franchise and get it functioning for operation. This should comprise of purchase expenses, your opening stock and the amount of working capital you need to break even. Knowing these costs is essential so you can monitor your funds meticulously and avoid debt.
Additionally, you also need to know how you’re going to finance the company, as a lot of people mistakenly buy a franchise too large and beyond their capabilities. Speak to a retail property agent, as they’re experienced and can assist you in selecting what will work best for you.
2. What are you passionate and exceptional at?
You do not need to enjoy burgers to start your franchise burger store. Nor do you need to do all of the work.
When it comes to conducting that store, you are a small business owner and may hire individuals to provide the service or market the goods; you do not need to do all that yourself. Success is determined by how well you operate the company, so as the famous quote goes, let systems run the business, and people run the systems.
However, not everyone is cut out to operate a franchise and flourish within another organisations banner. Before purchasing, ask yourself if you consider yourself aligned with the brand culture of the franchise and if you can resonate with the target demographic. It is paramount that you are harmonious with the vision of the brand. Be wary of how susceptible the franchise is to controversy, as another franchisees store can still affect you.
3. How long do you want to make investments?
While beginning a franchise differs from starting your company, it’s still a company, and you will not be the very first person who left behind their routine shift work to running an entire business
Make sure you understand what is required of you. You will find seasonal franchises that need you to work particularly hard at particular times of the year; however, it is still your company that you are likely to be operating, and you want to be clear about how long you’ll have to run to ensure it is a profitable success.
If you’re operating a burger franchise, there will be additional investments you’ll have to set aside budget for. You would be working with lots of oil, and will require grease trap cleaning to maintain your kitchen. The common problem that occurs to all retailers, is public toilets. This is an extra expense that will require waste management specialists to clean the drains. Always have contingency funds to accommodate for such occurrences.
4. How is the franchisor perceived?
Not all franchisors will be exactly the same, so you have to do your research and get to know all you can about the franchisor. This includes things like how long has that business been in operation, what is its typical success rate and how long do franchisees tend to remain.
Choosing to franchise a new business to the market can be a gamble, so it is often better to franchise an established brand. With that in mind, the more you understand, the better informed your choice is.
5. What exactly does it take to conduct a successful franchise?
When you do your due diligence, then ensure that you talk to other franchisees rather than simply the best performing one. Ask as many as you can to acquire a variety of data and experience.
- What were the key success factors that they discovered?
- What adversity did they encounter and how did they overcome it?
- If they were to start over, what would they do differently?
- For individuals who failed, what would be the elements that caused it to occur?
- Just how long did it take for them to begin to earn a profit?
It is good to learn from the errors. It is even better if you’re able to find out from others so you don’t replicate their hardships. You also have to remember the additional costs such as a website, network security, CRM (customer relationship management) software, and payroll software needed to run the business. If you have strong foundations in those areas, you’re on the right track. We recommend hiring an I.T managed service provider to assist in protecting the private data of your business and employees. When payroll is involved, you do not want to risk being cyber attacked. As a new franchisee, small business I.T support is a smart initiative to implement.
6. What type of assistance does the franchisor provide?
When you choose a company, unlike beginning your own business, you are not entirely independent, and that may be a wonderful comfort. Just be certain that you are aware of how much support you’ll receive from the franchisor, what other people’s experiences have been and just how much aid the firm offered those folks when the going got rough. How much service did new franchisees get, or were they left to their own devices?
Among the most challenging things is requesting help when times are hard. However, if you are aware that the support is going to be there and the franchisor is willing to assist, the procedure will likely be a touch easier.
7. Have an exit strategy
Before you take your own franchise, be aware and know exactly what your exit strategy will be. Have you been likely to leave the franchise for your kids, are you currently looking market it or would you intend to simply run it for a few years and sell it for a nice sum? The better you know and comprehend the end game, the easier it will be to select the ideal type of franchise opportunity that matches you both short and long-term. Upon selling, you will need to go through a commercial property agent to make the sale.
Running a business can be a fantastic way to begin running your own business, However, you have to understand why you’re getting right into it, exactly what you are becoming, what you are getting into and how it benefits you inside and outside of work. The better you understand these questions, the greater your odds of choosing the franchise section and business with the best potential for you.