Once you have decided to buy into a franchise, you will slowly notice that costs are getting out of hand. However, there are numerous things you can do to reduce this financial burden before signing the documents.
Many franchisees strapped for cash look for different ways to cut expenses that can help them reduce operating costs. What many individuals fail to realise is to get everything right from the beginning and slowly start to make adjustments as they move forward.
You are obligated to follow the requirements set by your franchisor in the agreement, including specific operating requests. However, some aspects of running the business from the launch to a fully-established franchise are up to your discretion.
Here are a few helpful ways you can reduce the operating costs from the very beginning:
Selecting the perfect site is one of the most critical aspects when determining your franchise business’s success. Before making big decisions, you need to assess the target area, your operation, sales, and potential customers needed to cover all the costs associated with a shopping centre site. For a franchisee to be successful, they must know the demographics of the area where they plan to open a store. They also need to know how those demographics match the customers they aim to attract.
You can save considerably by opting for a store in growing areas and a high-traffic location. This way, you can negotiate with leasing agents rather than having discussions with retail landlords that often lead nowhere.
It’s easy to be caught up in a buying spree when you buy into a new business; however, you need to understand that not all equipment has to be brand new. You can significantly reduce costs by leasing equipment rather than purchasing it immediately. It is an excellent way for franchisees to minimise start-up costs.
Businesses that often invest significant amounts for equipment buy into an asset that loses its value over time. However, when you lease equipment, you have the flexibility to return, upgrade, or replace this equipment when needed, saving you significant amounts of money in the process.
While there isn’t a fixed formula that all franchisees can follow, many franchise owners believe purchasing new equipment at the beginning is more cost-effective. However, this isn’t the case with each business; you can lose money over time.
Remember that your employees are not just one part of your business. Many franchises require a certain level of customer satisfaction, making it crucial to realise that your employees are not just one component of your business but your business.
While it may seem that hiring young staff is a cost-effective strategy, in reality, it will end up costing you more in the long run. Ensure that the team you hire shares the same values and agree on other elements, including workplace health and safety, bullying and harassment, and your daily instructions.
You can tackle this issue by hiring a small staff of experienced employees, either full-time or half-time, and invest in them through proper training, job security, and the opportunity to progress in the company. This way, you get a highly committed team willing to stick by you for years to come.
An accurate and detailed employment record is a precautionary measure rather than a cost-cutting strategy. You greatly reduce the likelihood of being audited by the government agencies like the Fair Work Commission by establishing stringent compliance processes within your franchise.
Besides potential fines, maintaining accurate employee records is just an excellent business practice. In certain instances, it can prevent employee conflicts and help newer business owners monitor cash flow more effectively.
Most of the tips mentioned here focus more on due diligence and compliance rather than various elements you can eliminate from your original plan.
Never overlook the financial or legal advice an experienced franchise professional provides to reduce the cost of your initial investment, as it can easily cost you more in the long run.
If you want more franchising information, contact the experts at The Franchise Institute. You can call us on 1300 855 435 or fill in this contact form, and one of our experts will contact you as soon as possible to answer all your questions.
Thanks for reading,
The Franchise Institute Team
1300 855 435