5 Aspects to Consider for a Successful Franchise Business

5 Aspects to Consider for a Successful Franchise Business

You can truly enjoy all the benefits of a franchise only if you purchase it wisely. There are nearly 80,000 franchised businesses in Australia, and this number grows with each passing year. However, about 80% of small independent businesses fail within the first 5 years of business.

If you want to run a successful franchise business, you need to evaluate the risks and determine whether the business is worth the investment. Before you spend your money, you should consider your options and consider different points.

#1 Is it Good Financial Decision?

You need to make sure that purchasing the franchise is a good decision. You can ask the franchisor to give you a full financial data that would include information from both franchise stores as well as the main corporate store. Some companies will offer business plans, profit and loss statements, financial models, and other such information as well. You need to evaluate the data and determine:

  • How much of the product or service you need to sell
  • How many clients you need to serve
  • How much investment you need to break even on an average, after all the overhead expenses

This information will help you determine whether the franchise is a good financial decision.

#2 Find out how much time it would take to see Return on Investment

The bigger the investment, the longer it would take to earn the amount. For example, if you make an investment of $100,000, you might see a profit of about $50,000 to $70,000, which will help you earn back the money in about 2 years. A $1 million business would earn you $200,000 to $400,000 annually, and you would earn back the investment in about 5 or more years.

#3 Get references from other Franchisees

One of the best ways to determine how well a franchise performs is to ask other franchisees. The franchisor will provide contact details of all current and previous franchisees so you can contact them and ask about their personal experience. You can ask about the financial investment, profits, ROI, cost of operation, etc. They will be able to provide unbiased opinions on the profitability of the particular franchise.

#4 Are the Franchisors highly prescriptive?

Yes. Franchisors allow you to use their brand and intellectual property and your actions will have an impact on their brand image. Naturally, they want to make sure that nothing damages their reputation and business. You can expect advice and suggestions on:

  • How the business is supposed to be run
  • What kind of training you and your employees should receive
  • What kind of support is offered
  • The kind of marketing strategy the franchisor employs and how you should market locally

You’ll also have a number of responsibilities and they include financial reporting, attendance at conferences, operational compliance, minimum performance reports, and brand compliance.

#5 Do Franchisor’s supply comprehensive documentation

Franchisors want to maintain their brand image and help you succeed, so they’ll give you as much information about their company as possible. You can expect to get the following documentation from them:

  • Operations and training procedure manuals
  • Guidelines to maintain brand consistency
  • Guidelines to brand marketing and local area marketing strategies
  • Communication platform and guidelines to interaction with customers online and on social media.

A franchisor will also offer a communications handle to speak to them directly and get advice on matters related to the brand and day-to-day operations.

If you want to know more about franchising or want some advice, 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

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