People today are opting to partner as a franchise rather than starting their own business, which in the current times, is a great idea. However, in these times of social media propaganda and highly marketed brands, it can be tricky to choose that one brand, which is actually worth your investment and time. Hence, it is advisable to spend adequate time researching and analyzing all options before making a decision. Let's look at some of the steps one should follow before choosing any brand.
Understanding Personal Preferences
1. Personal goals
People have different reasons behind owning a franchise. Ask yourself what your goals are, whether you want to earn more money or want more freedom by running your own business or want to start something as a hobby. Knowing your goals will help you in making the correct decision. You can choose the option, which best fits your goals.
2. Personal interest
Know your interests and choose a franchise opportunity, which fulfills your interests. Running a franchise can be a full-time job and it is very important that you do what you enjoy doing or you might not want to continue it for long.
3. Strengths
Choose a brand that will enable you to play to your strengths in your role there. For example, if you are not very good at marketing, you shouldn't start a franchise, which requires you to be engaged in constant marketing and if you are good at operations, you can choose a brand, which is more operations oriented.
4. Financial Capacity
Before you choose any franchise, you need to be fully aware of your financial situation. Buying a franchise can be a huge investment and you need to know how much exactly would you be able to invest, so calculate the upper limit of your future investment.
Research
1. Consumer Demand
Firstly, conduct research to understand which brand has more demand because that is what will have the most impact on your bottom line. Check for consumer demand in and near the locations where you would open the franchise. Compare brands under this and narrow down your list to brands with the highest consumer demand.
2. Market Demand
Second is checking for market demand, that is to check whether the field has place for more stores, if a field is overpopulated with stores or brands, then investing in it might be a bad idea because of the heavy competition, similarly, if a field has few too few stores or brands in it, it could be a sign of a lack of consumer demand. Checking for market demand helps in adding another dimension to our research but it is to be noted, that the final decision should be based on the consolidation of all steps and not on any step alone.
3. Brand Familiarity
Compare the brands and find out about their popularity among the people especially of the region where you would open the franchise. One main benefit of taking a franchise is that you get an already established brand to sell with and if the brand is not very popular then it takes away the edge that a franchise can give you.
4. Investigate Past Franchises
It is very important to find out about other franchises of the brand and speak to them as well. You need to know the number and profits of other franchises held by the brand. Also, speak to some franchise owners and find out about the ground reality of running the franchise of the particular brand. This will give you an idea about the obstacles you might have to overcome or the benefits the brand might bring. Also, try to speak to some former franchises, who might have sold off or shut down their franchises. This will help in understanding the challenges faced by the franchise and then you can determine if you also might face the same challenges and if you could run the franchise.
5. Support
Ask and find out about the support models provided by the franchisors. Receiving adequate support from the franchisors plays a big part in helping you establish your franchise fast and reduces chaos. Franchisors should offer proper training to you and your staff to ensure full productivity from the beginning. Choose a franchise, which offers such support and more.
Technical and Other Issues
1. Revenue Model
It is imperative to fully understand the revenue model of the company and to analyze your expenditure against probable profits. You must choose a franchise, which will give you higher profits.
2. One-time Costs
You will have to cover various costs during and after the opening of your franchise. Some would be one-time costs and others would be recurring. It is important to calculate all costs before investing. Knowledge of these costs will help you in choosing the company, which has lower costs. Let's look a bit at some of the one-time costs you need to calculate.
Franchise fee - Franchise fee is the payment you will be made to the franchisor at the beginning in order to be able to use the brand name.
Capital investment - You will have to invest in equipment or other capital at the beginning to start your franchise, this is called capital investment.
Training costs - Training costs would include any training that you or your staff may have to undergo at the beginning.
Property rental/development - You will have to sign a lease or build a place for the franchise. Signing a lease will also include a deposit along with the rental. Some companies might need you to get a property developed and that development cost also needs to be added.
Property design - Customizing the property to match it with the brand's aesthetic and design. Execution of the design would also add to your costs.
Others - Other costs such as insurance fees, legal fees, permits, etc. will also be borne by you.
3. Recurring Costs
There will be various recurring or monthly expenditures that you will have to bear. For example,
Everyday expenses - Your everyday expenses such as salary, inventory, electricity and utility bills and other operational costs.
Royalty fee - This is the royalty fee that you will be paying the franchisor for using their brand name. Franchisors have a fixed rate that they may charge all their franchises however, there is usually room for some negotiations based on other factors affecting the profits or revenue.
Advertising costs - You might need to spend some money on regular advertising or promotions despite belonging to a famous brand company, these would constitute your advertising costs.
4. Marketing and Advertising Plans
Ask companies in detail about their marketing plans. Brands have huge marketing budgets but they are spent on national or international level campaigns. Inquire about their local marketing strategies and investments too.
5. Litigations
It is highly suggested to find out about any past litigations or legal issues that the company might have faced or is still facing. If there exists any serious legal case, it could hamper your future with the company. It is advisable to hire a legal advisor to help you confirm the legal status of the company.
6. Terms and Conditions
Ask for all details of the agreement and read the agreement yourself and also get it looked by your legal and financial advisors. Contracts can often contain certain terms and conditions, which were not discussed and can later cause problems.
Following these steps would help you in picking the brand that is the right fit for you. Always remember to be thorough with your background checks on the brand because buying a franchise is a long term commitment and you need to be very careful before making the investment. Also, pay attention to your instinct, if a certain team does not feel right, do not go for it. Get all your doubts clarified before signing the agreement and keep all your points clearly in front of the other party. If done right, buying a franchise can be a great decision, so choose the brand that you want to work with and choose it for the right reasons.
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