When it comes to franchising, there are many options and it can be hard to distinguish a good opportunity from a potential disaster. Finding the right franchise is not something that can be done in a day; it requires some pretty rigorous research to delve into the detail.
Here are some features of franchising, and the signs of a good opportunity.
Features of franchising
Being a franchisee is quite different from simply starting up your own business from scratch.
As a franchisee, you get to run your own business using the franchise’s brand and established business system. A good franchise will provide you with a system that has been proven to work, along with the training and support to enact it.
You are also provided with an expert to mentor and help you make your business profitable. It’s not the same as being an employee, as you are in effect your own boss.
Franchises of course cost money, and you want to ensure you get good value!
Characteristics of a good franchise opportunity
A good franchise will:
- Have a good business track record. Franchising should never be used to ‘fix up’ a business that is failing.
- Foster positive healthy relationships – with customers / clients, suppliers, employees and franchisees.
- Provide initial and ongoing training, development and mentoring for franchisees.
- Allow franchisees to work as independent traders without constant interference, but with the level of support they need to become profitable.
- Charge reasonable fees that will not prevent franchisees from running profitable businesses.
- Offer openness, transparency, honesty and good communication. This one is vital! After all, you want to be able to assess all of the fine detail before signing the contract.
How to research a franchise opportunity
The best way to start is to ask lots of questions! Examples include:
- How long has the business been going, and how well is it doing?
- What is the level of training available for franchisees, and is it ongoing?
- What fees are charged for both upfront and ongoing royalties? Check whether the royalties involve a flat monthly fee (which you still have to pay during holiday breaks) or a percentage of revenue.
- What is the level of demand for the product or service?
- What marketing systems and methods are used?
- Will you be provided with a specific territory? Will you be provided with clients, or will you have to find your own?
- Do they provide bookkeeping, or you will have to do your own? In some cases the franchisor will do all the bookkeeping and revenue collection, and in others they won’t provide this service.
Another great tip:
- See if you can visit an existing franchisee to see how they go about their workday. This should also provide you with the opportunity to ask the franchisee lots of questions.
Signs to watch out for
- If a franchise is very cheap to buy, ask yourself why. A very low-cost franchise might mean they offer little in the way of ongoing support. A good franchise will charge fees that provide value for franchisees.
- Messy and unkempt headquarters, unhappy-looking staff, or a website that has been left to languish or has poor-quality content can be red flags for a business that is not on top of its game.
You should gather as much information as you possibly can before signing contracts. Even if it takes up quite a bit of time, it will be worth it in the end.
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