Franchising seems like an excellent opportunity for someone wanting to run their own business without the associated high risks of building it from the ground up. The overall belief is that franchising is easy and that almost anyone can make a success of it.
Well, this couldn’t be further from the truth. Although it’s a fact that franchising is a low-risk business avenue, it can be challenging if you are expecting to be handed everything on a platter and have no business expertise. If they falter and fail, they start pointing fingers everywhere except themselves.
Some franchisors are unscrupulous and callous and shortchange their franchising partners. However, that is not always the case. Before you contemplate committing to becoming a franchisee, consider these key points:
Individuals with entrepreneurial aspirations frequently misunderstand franchising as an investment in a system in which an established organisation provides training and support to its new franchisees. The opposite is true.
Franchise companies are not responsible for providing their franchisees with operational training. Though reputable franchises may give new franchisees guidance and training in the franchise’s brand and operating procedures, you need a firm grasp of business fundamentals to succeed.
To be successful with a franchise, you must be willing to commit to a specific location, especially in the retail and hotel industries. Explore the neighbourhood during your disclosure/cooling off time. Investigate who your major rivals are. Is there any indication that they are active?
To what end are they occupied or silent? Interrogate everyone you can find. If you aren’t already familiar with the franchise, it’s a good idea to get a list of existing franchisees to contact and ask questions. Either a satisfied or dissatisfied franchisee will gladly provide their opinions. Don’t be hesitant; your future depends on this, so ask away.
Before you sign the papers, by law, the franchisors must present you with extensive details on the franchise’s internal workings. Even when they give you all the details, they can’t coerce you into signing up and making payments for 14 days.
The sheer volume of data they present might be intimidating, but this is your best opportunity to gain a feel for the company and figure out where to target your follow-up questions before making a final investment decision.
Since the disclosure documents will include the company’s financial information, it’s a good idea to get expert guidance early on to determine where you are financially and how you could do in the first 24 months of operation.
Most businesses fail because people don’t plan for when they won’t have any significant revenue coming in, instead focusing solely on the initial investment required to get the firm up and running.
Nearly half of all businesses will eventually fail. It’s not always the fault of opportunistic franchisees or business partners or your problems; sometimes, it’s due to factors you had no way of foreseeing or controlling. Economies shift, consumer preferences shift, and trends evolve. Can you weather the storm if this company goes under? It’s important to consult a lawyer to safeguard your possessions before putting money into a franchise.
A franchise that bases its fees on a predetermined share of your earnings is more likely to be invested in your success and more confident of reaping financial rewards. Franchises with a set monthly fee, regardless of how well or poorly the business does, might not have your greatest interests in mind.
By putting in the time and effort upfront, you can increase the likelihood of your business reaching “critical mass” and being self-sustaining even while you enjoy your annual holidays.
If you want more franchising information, contact the experts at The Franchise Institute. You can call us on 1300 855 435 or fill out this contact form, and one of our experts will contact you as soon as possible to answer all your questions.
