10 Jul Things To Consider Before Purchasing A Franchise
Purchasing a franchise business is always easier and less of a hassle than starting your own business with a host of problems to resolve. When you become a franchisee, you purchase the rights to market and distribute the goods and services of a franchisor (the company). You are allowed to use the company’s business name for the duration of your contract.
The important reason why the franchising business model is safer to set up a new business is that you have the backing of a proven and successful company. There are certain disadvantages to franchising as well, which is why some may prefer to set up their own business rather than jump onto the franchising bandwagon. So, how to decide which the right kind of business model will work for you? Here are six factors to think about and consider before you decide to buy a franchise.
#1 Market Demand For a Product Or Service
The demand for a product or service is at the core of any business. Conduct research on the present and prospective market for the product you intend to offer. Potential demand tells you about the future growth path of your business if you decide to expand it through multiple outlets. If your franchising license is for a foreign product, ensure that there is demand for it among consumers in Australia.
#2 Franchisor’s Track Record
Offers of franchising opportunities from a company do not necessarily mean that it has a track record in this space. You need to select companies that have a proven record for franchising business. The best way to get a better idea of a company’s standing is to seek information from the company’s current franchisees about their experience.
#3 Is It A Sound Business Investment?
A franchise business is an investment. Some portion of this investment, ranging from a few thousand to a few million dollars, is passed on to the franchisor in the form of fees for licensing, equipment, and training. If it is your own business, you will use this amount as capital for operations.
How do you determine whether it is a sound investment? As a seasoned businessperson, look at what you get in return for the franchise fees and the time required to recoup these upfront costs, even before you start making profits.
#4 Competition From Franchisees And Others
Well-known brands have many franchisees operating in a given area as well as rival companies selling similar products/services. It is very tough for newcomers to establish a business in such an environment. However, you will find enough leg space if the franchise and the industry you enter is a strategic business. In case of a unique product too, competition is not an obstacle, but that is a different ball game.
#5 Training Is An Advantage
Franchisees receive training and support from the franchisor, which is an important advantage for a novice entrepreneur. Choosing a franchisor that offers excellent training and ongoing support when the franchise business is up and running is advantageous. This contributes to the success of the franchise business right from the get-go.
#6 The Restrictions That Come With A Franchise
Almost every franchisor imposes rules and regulations for running a franchise business. Franchisees need to follow specific standards and guidelines. They cover issues such as store design, prices, product offerings, operational hours, etc.
The franchisor holds the remote control, and franchisees operate within a given framework. As a franchisee, you need to keep this in view to avoid discord in your relationship with the franchisor.
If you want to know more, feel free to get in touch with us at The Franchise Institute. You can call us on 1300 855 435 or fill in this contact us form and we’ll reply as soon as we can.
Thanks for reading,
The Franchise Institute Team
1300 855 435