If you’re wanting to be your own boss by becoming a business owner, there is a convincing argument for investing in a franchise business rather than striking out on your own – but it’s crucial to do your homework before signing on the signed line.
Franchising has long been a popular way to entrepreneurial success. Franchising has a substantially lower failure rate than that of independent firms (as much as 5x less) yet there are still considerable risks associated when purchasing in to a franchise.”
The bulk of franchise-specific risks may be minimized if a potential franchisee simply does their homework and properly analyses both the brand and the health of the industry before investing in. “
It’s also crucial to examine your own skills and what will be required of you as a franchisee, as not everyone is suited to this journey. There are so many franchise facts you should know.
Top 10 considerations that any potential franchisee should consider into three categories:
Market considerations
1. Consider the market
Make sure that there is enough demand for your possible product or service before signing on, for example, it’s a tough time to be a business owner in South Africa therefore Potential franchisees should undertake thorough research in terms of consumer trends, market demand and any risk concerns.
Luckily, access to market intelligence and customer insights are some of the key advantages of joining a franchise, therefore potential franchisees should be able to access this data.
2. Consider your competitors
Once you’ve determined if there’s a market for the product or service that your franchise will offer, explore how that demand is already being satisfied by rivals. Having an honest discussion with a representative from the original franchise itself about what market advantages the franchisee can bank on and whether they can realistically expect to outsell competitors in the area and why.
3. Brand’s reputation
Reputation can make or break a corporation and in the case of franchising, reputation can be influenced by one bad actor and end up tainting the whole brand. For gathering information regarding franchise browse Google and Facebook reviews, speak to customers, and finding out if there has been any unfavourable media attention around the brand in the last five years. It’s vital that franchisees be completely aware of the public view around the franchise, and that this information comes from an objective source – don’t only trust what Head Office says.
Practical Considerations
Once the initial research has been performed it’s time to start thinking practically about what is required to get the franchise up and operating.
4. Consider the success rates of other franchisees
Talk to other franchisee’s and ask them to be honest about their experiences – would they advocate joining the franchise to others? What have their success rates been like and what hurdles have they experienced? Looking at sales statistics and financial reports from other franchisees (and the company as a whole) might assist complete out this picture.
5. Consider the start-up expenditures involved
There is an initial cost to joining a franchise, since franchisees need to pay a licencing fee for the ability to use the brand’s assets and resources. While this joining fee is an expected part of the process, inquiring what other early charges will be required for planning considerations. On the plus side, the franchise’s marketing tools and support – a significant benefit of adopting the franchise model – should be included in this joining fee and will assist you in getting clients in the door once you’re ready to open.
6. Consider what your income potential will be
Once the business is up and going, it may still be several months before you start to break even. Find out the typical amount of time it takes most franchisees to start producing a profit so that you can be financially prepared and have the liquid money necessary to cover running costs. Make sure that you have the money and resources to back you up over this period and remain careful with your spending.
7. Consider the business concept of the franchise
Is the business strategy of the franchise structured to facilitate your success as a franchisee? Are there tried-and-tested methods in place to secure the profitability of the business? Analysing the business model of the franchise also requires taking into account the recurring payments such as royalties that must be paid to the franchisor by the franchisor, as this could have a substantial impact on profitability.
Personal Considerations
The final set of considerations a franchisee must evaluate before joining a franchise are their personal character and career ambitions – do they mesh with the nature of franchising?
8. Think about the expectations placed on you as a franchisee
Becoming a franchisee includes many of the same duties as being an independent business owner – you will be accountable for a workforce and for the practical requirements of keeping a business running. To be a successful franchisee you need to be a leader and this will demand sacrifice and making hard decisions – before you take on this responsibility it’s crucial that you be aware of what will be required of you.
9. Consider what resources are available to assist you achieve
Business mentorship is a fundamental benefit of the franchise model, but not all franchises have procedures in place to provide continuous mentorship and support to their franchisees. Choose a franchisor that has made mentorship a priority and that delivers assistance and resources to their franchisees long after the initial training.
10. Consider whether or not being a franchisee fits to your passion and personal qualities
Finally, not everyone is cut out to be a franchisee. Finally, not everyone is cut out to be a franchisee. Even if your name isn’t on the sign, you must be enthusiastic about joining the franchise and dedicated to its success. You need to embrace hard work, responsibility and the quest of perfection if you undertake this adventure.
