Are you considering launching a franchise? If you’ve been thinking about opening up a Subway, Tim Horton’s, McDonald’s or a Burger King franchise, then you may have come up with a good idea, because owning and operating an already established brand is a sound long-term investment to make.
Indeed, it can be quite expensive to open up a Supercuts, Jiffy Lube or Second Cup – the initial costs can run into the hundreds of thousands – but the return on investment is quite attractive. Besides, buying into a franchise instead of actually starting up a brand new company comes with plenty of advantages, particularly when it comes to brand recognition.
You may have been given a warning about getting involved in the franchising process – critics will often cite the immense franchise revenues that actually go to the corporation – but if you relish the thought of working for yourself and not wanting to take too much entrepreneurial risk, then owning a franchise is the best option in moving forward.
Think about this for a moment: we all walk into a franchise at least once a week, whether it’s for shipping, a haircut or buying a coffee, and consumers are likelier to venture inside a well-known multinational corporate brand, instead of an unknown mom and pop coffee shop. Also, ask yourself this question: when was the last time you noticed a McDonald’s or a Tim Horton’s shut down?
So, you’re thinking of opening up a franchise... here are eight steps to take to establish one:
1. Select the Franchise
Do you want to be in the coffee business, burger industry or pizza field? Prior to dipping your foot into the world of business, think about what type of business you want to run, what your skills are and how they can translate to operating a franchise. If you’re a cook by trade and you have no idea how the shipping process works, then you wouldn’t want to own a FedEx store.
2. Research Your Financial Situation
It’s a great idea that you want to own a franchise, but what about your personal financial situation? If you’re suffering from an enormous mortgage, too much credit card debt, an excessive car loan, twins on the way and high tuition rates for your teenage children then you may want to sit on the sidelines for a little bit before you take on an expensive endeavor.
3. Produce a Business Plan
Now that you have chosen the franchise and researched your personal finances, it’s imperative to complete a business plan, a measure that creates marketing, advertising, financing and other types of schemes to keep the business afloat. A business plan helps the entrepreneur, financial institution and other investors get an understanding of how the business will operate, how much money it is expected to generate each month, what the daily expenses are and what profits are to be had.
Here is the ultimate guide to constructing a well thought out business plan: Business Plans - A Step-by-Step Guide.
4. Raise Investment Capital
An in-depth business plan will certainly contribute to your efforts to receive enough capital to launch a franchise. There are a wide variety of ways to raise a sufficient amount of investment capital, including a business loan from the bank, money from venture capitalists, family members, merchant cash advance and peer-to-peer lending.
5. Find a Location
Location, location, location! This is probably the most important aspect of owning a franchise. Seeking out the best location is key to your franchise’s success. The obvious place is somewhere close to a high level of foot traffic (shopping malls, city centers, public transit and others). Remember, these are very expensive areas to purchase a spot for your shop, so maybe think about unconventional areas, too.
6. Order Inventory & Equipment
With the right location and enough investment capital, you can order the inventory and equipment. Don’t just purchase the most expensive oven or ingredients right away. Instead, perform your due diligence and look for the best deals out there from suppliers – always try to negotiate them down just a little bit to help improve your overall business finances.
7. Seek Out Staff
As governments institute higher minimum wages you will have to find the best staff possible. This means that you should employ those with the most experience so it requires little training and it prompts better customer service. Labor costs will remain one of the biggest expenses for a business, so be wise in who you hire.
Here is one bit of advice: try to automate as much as possible when operating a franchise, which is the trend being adopted among your competitors.
8. Speak with Your Franchiser
Once all of these steps have been completed, it’s wise to speak with the professional in charge of your area. These franchiser experts can offer you the best advice, keep you up-to-date in regards to industry trends and business costs, and how to improve your bottom line. Since you’re paying high franchise costs, always get the most out of these individuals, whether it’s suggestions, materials or workshops.
Maintaining a franchise is an exciting business venture for anyone. Although it can be financially difficult and comes with an exorbitant amount of stress and hard work, it’s something that will pay off in several years’ time. As the economy somewhat improves and consumers are more confident in opening their wallets, your franchise will experience the benefits of the aforementioned.