A franchise is a unique business model that has grown in popularity in recent years around the world. Aspiring entrepreneurs and business leaders are increasingly choosing to go down the franchising route because of the inherent financial benefits it brings, as well as the organizational and structural support that franchisers offer that can greatly reduce the risks associated with building a business from the ground up.
It’s a tried-and-tested model that offers stability in the competitive market, simply because joining a thriving business is a much more realistic way to grow your entrepreneurial career than to venture into the market all on your own. That said, this doesn’t mean that you should just jump in without first taking the necessary steps to support and validate your franchising idea. Let’s take a closer look at the essential considerations all future franchise owners should take into account.
Invest in something you’re passionate about
Running a successful business, franchise or not, requires passion as much as it requires a calculated approach and a comprehensive growth strategy. When it comes to running a franchise business, however, the need to be passionate about your field and scope of work becomes even more important. You have a responsibility to yourself, your staff, as well as the franchisor to maximize the potential of your store and give it your all to ensure long-term growth.
Are you ready and willing to devote your time and expertise to see this goal to fruition? To achieve this, you need to be passionate about the business, as well as the parent brand. It will allow you to pour your heart and soul into your work, and build a thriving business in your market.
Support your passion with market research
No matter how passionate you might feel about a business idea, a service, or a product, you need to keep in mind that passion alone cannot overcome unfavorable market conditions. In other words, you need to research the consumer market as well as your competitors before you buy into a franchise, in order to assess the long-term viability of your business idea.
Sometimes, a better option would be to invest in something you’re good at than something you’re passionate about, but the best choice is to always pick a niche with a viable growth potential. The numbers don’t lie, so use industry insights to make calculated projections, assess your long-term growth potential, and choose a franchise that’s on an upward trajectory.
Tend to meticulous franchise research
Once you have researched the market potential and the relevant actors in your field, it’s time to tend to meticulous franchise research. This is one of the most important steps, as it will allow you to delve deep into the inner workings of potential franchises and learn how to choose a franchise based on its culture, growth potential, financial status, and most importantly, the support and guidance it provides to its franchisees.
During this phase, you want to be as meticulous as possible, making sure you ask all of the questions that allow you to gain more knowledge about the franchise. Leave no stone unturned, and be sure to search for the possible skeletons in their closets as well – don’t allow yourself to be swayed by fancy marketing, but instead employ critical thinking to gain an objective overview of the franchise. Once you have gathered the information about every prospect, you can go ahead and weigh the pros against the cons for each one, and slowly start narrowing your search.
Get in touch with other franchisees
As a final part of your research and discovery processes, you want to hear what other franchisees have to say about the brand. Be sure to get in touch with franchisees from every franchise you’re considering in order to get an even better overview of the “quality of life” within a specific brand architecture. Other franchise owners will be able to share some insights with you on good business practices as well, and how to preserve a healthy and mutually-beneficial relationship with the parent brand.
However, it pays to get in touch with previous franchise owners who chose to sell or close their stores. These people will be able to tell you why their business failed, and why they had to abandon ship. Who knows, maybe you will discover something about one of the franchises that will spare you the same fate.
Develop a comprehensive financial plan
There is no denying that money makes the business world go ‘round, so there is a need to create a comprehensive financial plan that will not only buy your way into a franchise, but also ensure the business stays afloat no matter the socio-economic trends that might shape your market. Keep in mind that even though some franchises provide financial support to their new franchisees, that doesn’t mean that you are not required to secure operating capital as soon as possible.
Be sure to calculate your operating expenses before investing, aside from the investment capital needed to buy the franchise. Once the franchise is up and running, you’ll need to start allocating cash flow to your emergency fund to build a financial safety net for the slow months of the year. And finally, keep in mind that innovation and expansion will be the pillars of your long-term success, so you will need to allocate funds towards these goals as well. All of this and more should be specified in your financial plan.
Buying a franchise might be a safer way to venture into the entrepreneurial world nowadays, but that doesn’t mean that you shouldn’t take all of the necessary precautions in order to avoid some common pitfalls. Use these tips to make a smart investment into a lucrative and successful future as an owner of a thriving franchise.