If you are someone passionate about business and would like a business that has an already established brand, then going for a franchise is a great option. Franchising is a concept that has existed for many years and many people prefer it because it saves them the struggle of starting a business from scratch.
What is a franchise?
Simply put, a franchise is a contractual agreement between a franchisor and a franchisee. The agreement gives the franchisee the right to use the brand of the Franchisor as well as distribute his products.
Here are 5 things you need to know before opening a franchise location:
1. How much will it cost?
One of the first things you will need to determine is the total investment cost of the franchise. This may include the cost of acquiring the franchise, opening stock, and the total amount of working capital that will be required before breaking even.
It is important to understand these costs early to avoid plunging your business into a financial crisis when it’s about to take off. Besides, you should also know how and where you will obtain the funds that will help you run the business successfully.
This is one of the most important factors to consider before opening a franchise location. You need to find out the demand for the product or service you are planning to offer in that particular location. If there is a demand, how big is it? Who are your competitors, does the business have chances of expansion in the near future?
Take a piece of paper and write down the pros and cons of launching a business in that area and spend some time analyzing. This will give you a clear picture of the business’ future.
3. How much time will you need to invest in the business?
Although buying a franchise is a little different from starting a business from scratch, you will still need to dedicate considerable time to the business. Some people rush into franchising thinking that they will spend minimal time while making huge profits.
But that’s not always the case. It is important to understand what the business involves and how much of your personal time will be required for the business to succeed.
4. What kind of help will you get from the franchisor?
Unlike a business that you start from scratch, a franchise is an already established brand. This means there are certain aspects of the business that the franchisor has already done for you. You will, therefore, need to find out the kind of support that you will be getting from the parent company. The top franchises generally have more support that they can offer up front until you hit the ground running.
Ensure that you understand the rules of the game. Before opening a franchise location, you need to be familiar with the restrictions associated with the business. In other words, get to know who will be in full control of the business, is it you or the franchisor.
In a nutshell, franchising is a great option for entrepreneurs who prefer not to start businesses from scratch. However, you should understand a few things about the franchising business before getting started.