Franchising is one of the most remarkable ways to start a business. A franchise enables you to open a business that thrives on the popularity of well-established brands and enjoys instant success and profits. While startups take a long time to peak, a franchise attracts customers instantly. Although franchise acts as a highway to exponential growth, you need to understand that franchising a business can become a tiring process.
However, should you wish to venture into a franchise business, this article provides you with an overview of what you need to know about starting a franchise:
Meaning of a Franchise Business
A franchise business refers to an enterprise where the company (a franchisor) allows another enterprise (a franchisee) to access its proprietary business expertise and conduct business under its brand name.
To acquire the franchise, the franchisee pays the franchisor a startup fee. The franchisor assists the franchisee in organizing, merchandising, managing, and marketing the enterprise.
How to Open a Franchise Business
Today, every business, whether small or large, aims to expand its operations and enhance accessibility through franchising. Therefore, as an entrepreneur who wants to start a franchise, the following tips will help you:
1. Recognize your industry
Before starting a franchise, you need first to identify the industry you want to enter. Even if a franchise is popular, it may not work for you. When conducting your franchise research, look for the following criteria:
Sales record – Choose a franchise with tangible proof of profitability
Market growth– To ensure business continuity and success; opt for a franchise that is in a rapidly growing market
Competition– although a little competition is healthy for your business, stiff completion can crumble your enterprise. Thus, choose a franchise that does not have many local companies in the same industry situated in one area.
Social responsibility– as an entrepreneur, you need to conduct business with a socially responsible organization. Evaluate the social responsibility of the franchise you want to join.
Repeat business– evaluate whether there is the possibility that your chosen franchise can bring other companies near you.
Franchise fees– get to know the charges you will pay for the franchise and what you will get in return.
2. Secure funds
Once you have chosen the franchise that best suits you, you need to secure funds to get your business off the ground. You can consider various financing options, including bank loans, personal savings, and SBA loans. Remember that you will need enough cash to cater to your expenses until your business begins to generate profits, which may take some months.
Although starting a business requires an individual to secure enough funds, there is no definite amount of money that you should invest when it comes to a franchise. Some franchise businesses need as low as $10,000, while others may cost $250,000.
3. Choose Your Location
When starting a franchise, selecting a strategic location is essential. You will need to conduct comprehensive market research about your target location’s demographics, including purchase power, fads and trends, economic status, rules and regulations, real estate costs, and many more.
Various reasons make well-established franchises fail in local and foreign markets. Since you aim to gain higher returns from your investment, selecting a proper location will help you and your franchise achieve business goals.
4. Create a Franchise Business Plan
To start a franchise, you need to have a good business plan because the franchisor will ask for one. Even if you have all the resources and insight required to open a franchise, an imperfect business plan can make you miss the opportunity. Thus, develop a business plan that clearly states your objectives, how the franchisor will benefit, the expected profit margins, staffing plans, and how you will comply with local authorities.
5. Schedule Your “Discovery Day” Meeting
A discovery day refers to an in-depth meeting that happens between the franchisor and the franchisee. Although it mainly occurs at the organization’s corporate office, it can happen at the franchise’s local outlet. The meeting will allow you to know your franchisor better and ask any questions before committing to the franchise.
6. Negotiate With the Franchisor
Typically, the franchisor will give you a franchise based on their terms and conditions. Globally, this conduct is an accepted norm in the franchising field. However, when you contemplate starting a franchise, it won’t be easy to agree with all the franchisor’s terms and conditions. Nevertheless, you can negotiate with the franchisor and establish terms and conditions that favor you.
7. Go For Training and Seek Support
Starting a franchise means entering into an already established brand with a logo, guidelines, messaging, and products or services. To entrench yourself, you need to get training on various aspects of the franchise, including branding, goods or services offered, where to get supplies, point-of-purchase displays and product placement, mode of payment, and sales strategies that suit that specific business model.
Starting a franchise can result in a fulfilling career. When you invest in one, your investments begin to pay off immediately, and you get to enjoy the benefits of partnering with an international brand. This ultimate guide helps you acquire essential insights into the franchising world.