Franchises provide outstanding business opportunities for people who want immediate returns as they allow you to buy into an existing profitable business model. You can find franchises in most industries, from restaurants to beauty salons to car repair. The initial investment into a franchise, the establishment cost, can vary greatly depend on many factors, including stock and fitouts for the retail oriented brands. Franchises, whilst often considered to be a collection of small businesses, in itself is huge, and a career change should only be made once you've done plenty of research.
Here are five things to know before you jump in:
Understand Franchise Fees and Any Ongoing Support
One of the key advantages to buying a franchise, compared to starting your own business from scratch, is the brand awareness and marketing advantages which will fast track your revenue stream from day one. Of course, this comes at a price. It’s important you do your due diligence and thoroughly understand both your up-front investment and the ongoing one, expected ROI and what marketing and training support you will receive initially and on a regular basis. The Franchise Council of Australia offers some great advice on this very topic:
In all business formats or package franchise programs, franchisors directly or indirectly collect payments from franchisees for the right to use their brand and to participate in their systems. Franchise fees can range in price (for up-front franchise fees and set-up) from as little as $5,000 to as much as $1 million, or more. Typically, franchisees are also required to pay ongoing fees for franchise support (such as training or an advertising fund), which may be a fixed monthly amount, or calculated as a percentage of turnover.
Fixed monthly amounts may range from $50 per month up, while percentage fees may range from 2% to as much as 15%. Additionally, a further fixed or percentage of turnover fee may be applied to cover the costs of group marketing.
The initial and ongoing franchise fees balance the fact that you also have access to immediate marketing and business support. Look for a brand that will provide ongoing training, franchisee events, lead generation support and professional development opportunities so you are always at the top of your game and able to run a successful, profitable business.
Assess Business Health and Market Trends
While it seems obvious that you'd only invest in a profitable franchise, this isn't always as easy to determine as you might think. It's essential to thoroughly look at the financials and to ensure that the future looks bright. This means understanding the future expectations of the industry, the opportunities for growth, technological developments on the horizon that could impact or disrupt the industry and the financial climate. It's good to study market trends as well as the health of the individual franchise (case in point: Blockbuster Video, once a booming franchise, now a niche after the video rental industry was completely disrupted).
Make Sure It's the Right Fit For You
While it’s very important to invest in a financially viable business, don’t lose sight of the bigger picture and why you’re going into business in the first place. One of the great benefits of franchising is that you get to make a profit doing something you love. If it’s not something you’re enthusiastic about, it's likely that you'll find your enthusiasm wanes when you end up spending most of your time doing something for which you have no passion. While you certainly want to find a popular and profitable franchise, you also should look beyond the numbers. To succeed in any business, you need to have a genuine interest in it and a desire to use or develop a skill set that matches the industry you’re entering.
It Can Be A Grind – But The Rewards Are Worth It
It’s common to underestimate just how much work is involved in establishing a business, even with the support of investing in a franchise. While the precise hours vary from one franchise to another, expect long days when you're starting out.
One of the things to know upfront is that although you’ll enjoy a certain level of autonomy you’ll still be expected to operate your business in a way that aligns with the overall processes of the wider operation. This might mean delivering products or services in a particular way to achieve consistency across the entire franchise. It also means regular reporting and training so that you’re up-to-speed with the latest developments and priorities of the franchise. Once you're established you can enjoy serious lifestyle benefits. But make sure you're prepared for the initial grind.
Seek Professional Advice
While you’re not required to consult a lawyer or accountant when you buy a franchise, it’s always a good idea. Lawyers experienced in contract law will advise you on the legal implications of franchising. An accountant can go through the financials, make sure it’s a worthy investment and help you set up the correct business structure. Although the professional advice is an additional expense, it may save you serious, and costly, headaches in the long run.
How we can help
If you have been contemplating starting your own business, but the idea of building a business from the ground up seems daunting, you are not alone. At ActionCOACH, we understand that starting a business can be overwhelming, especially if you are doing it for the first time. However, entrepreneurship can be an incredibly rewarding experience and can provide you with the freedom and flexibility you desire. With our proven business coaching methodologies, we can help you turn your entrepreneurial dreams into a reality. We can provide you with the tools, resources, and guidance you need to start and grow a successful business. Book a strategy session with one of our experienced business coaches today to learn more about how we can help you achieve your goals.
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