Being critical with finding the right franchise for you is important, especially in today’s time where consumers and customers are more meticulous with the things they buy. Starting a franchise may seem easy since the business is already established, but some things still need to be considered – from the demand for the product or service you want to franchise, to the consumers’ buying power around your area.
Factors to Consider Before Starting a Franchise
If you want to franchise a business successfully, you have to do a lot of studies and not just with the products or services the business offer, but also with the internal and external factors that could affect the performance of the franchise. The experts from Approved Franchises believe that finding a franchise to suit your requirements is vital. To ensure that the money you invest in franchising will multiply in time and not go to waste, we made a guide to help you become a successful franchisee.
The number one factor you should consider is the demand for the product or service you want to franchise in your area.
- Who is your target market?
- Is the demand for the product or service you want to franchise high among your target market?
- If there is demand, is it sustainable in the long-term?
- What is the buying behavior of your target market?
- What are the other businesses in the area? Who are your potential competitors?
Once the answers to all these questions are all positive for the franchise, then that’s a good sign.
Once you have a clear picture of the demand for the business you want to franchise, it’s time for the bigger questions:
How much money are you willing to spend? How much liquid capital do you need to maintain until you get a positive return on investment? There’s a saying that if you want to make money, you have to spend money, but to what extent can you provide for the franchise to keep it going until it starts earning your target profit?
If you’re franchising a business, you obviously have to get people to help you run the business. You have to be wise in picking the right people, so here are some things you need to consider when hiring your employees:
- Minimum wage rate around your area
- Compensation and benefits
- Working hours per week
- Employee requirements
- Training requirements
Facility and Location
In most cases, franchisees rent a space in a building or a whole building to operate the business. Of course, there are associated costs with renting a location for the business. You have to pay the security deposit, monthly rent, and utility expenses.
You also have to pay for the improvements of the location to make it look appealing and inviting to your customers, and buy the types of equipment vital for operating the business.
Skills and commitment for the business – The most pivotal factor you need to think about before franchising a business is the skills and commitment you have for it. Is your skillset a great match for the type of business you want to franchise? Do you have enough knowledge of running the business? Are you going to be committed to the business in the long run?
Assess yourself thoroughly, if you’re willing to learn and give your time and energy for this business, and if you imagine yourself running it for a long time.
The Basics of Starting a Franchise
Evaluate the costs
You have to be ready for the costs associated with franchising a business and make sure that you can maintain a liquid capital to keep the business going.
- Franchising fees – this is the flat cost that the franchisee needs to pay regularly to operate the business. You also need to keep in mind the regular marketing fees and royalties that come with franchising.
- Rent fees, utility expenses, equipment, and supplies – Once you made a transaction with a franchisor, they will then give you an idea of what equipment and supplies you need to run the business smoothly every day. There will also be monthly rental fees and utility expenses you need to pay for the location of the business.
- Employees’ compensation and benefits – Hiring employees depends on the type of business you are considering to franchise, but most of the time, you will need people to help you with it. Are you ready to have a regular financial commitment to your employees?
Choose a Franchise That Aligns With Your Skill Set and Business Goals
You have to know your strengths and weaknesses, the type of franchise you imagine yourself running for a long time, and how the franchise can help in achieving your business goals.
Prepare a Business Plan Proposal
Sometimes, franchisees need investors to meet the financial requirements in franchising a business. Once you’ve decided what business to buy, write a business plan to help you know the directions you will take when it’s operating, including the steps you need to achieve your financial goals. This will also serve as your pitch to potential investors.
Government’s Business Requirements
You have to be ready to comply with all the government’s requirements to operate. These include general business licenses and tax registrations.
Set Up an Inviting Location for the Franchise
You will need an area to operate the business, and you can either rent a space or buy a whole floor or building. After meeting all the requirements needed to operate a business in the location you’ve chosen, it’s time to furnish the area to make it look inviting to potential customers. Make sure that you choose a location that is good for the business.
It might not be easy to start a franchise, but once you’ve settled all the requirements needed to operate one, you will get the hang of it in time. Remember, you have to mentally, physically, and emotionally prepare yourself for buying a business, otherwise, you will have difficulty in the long run.