You need not be original to succeed in business. In fact, there’s one business with less stress and financial risk; a sure market; and a team of professionals and “co-investors” who can train you and provide you with actual experience as well as standardized systems and procedures to help you succeed.
It’s called franchising. Companies franchise their business to be able to sell and expand the markets or locations they cover using an independent, third-party operator. The operator pays the franchising company a fee or “royalty” to be able to put up a branch of the business in a particular location using its name, products, “goodwill”, and business model. The latter describes the rationale, objectives, various considerations, and strategies a company employs to deliver and entice customers to patronize its product, and earn profit.
Aside from not having to come up with your own original business, franchising especially the well-established businesses have their own advertising and promotional campaigns. They also have a comprehensive training program for franchisees and may assist you in financing your business through special discounts or rebates for bulk purchases of their products. What’s more, the “goodwill” that the business has created with its customers will be your own plus factor in attracting patrons to your location.
Franchises can range from your neighbourhood Laundromat to the popular convenience stores like 7-Eleven or Circle K, gasoline stations, food chains like McDonald’s, Burger King, Krispy Creme or Dunkin Donuts, or coffee houses like Starbucks and Seattle’s Best.
Your first consideration is to choose the franchise that interests you or suits your needs, talent, or skills. DO NOT choose a franchise based only on the potential or proven profits. If the business doesn’t interest you personally, chances are you won’t put in the time and effort needed to realize its fullest potential.
Here are some helpful tips:
- Have a clear vision of what you expect from a franchise. List and prioritize your expectations and considerations. Some questions worth asking are: Where is your planned location? How soon do you expect to open the franchise? Are you going into it full time, or will you have someone run it for you on a daily basis? How much do you intend to make on your first year? On your second year?
- Do you have the finances to start the franchise? If not, how do you intend to finance the business?
- Gather as much general information about your prospective franchise from the web and possibly from other franchisees. The intent is to assess what you can do or are capable of doing what the franchise demands, and what you believe is best for you.
- Once you’ve narrowed your choices, begin the prequalification process.
Franchisers will provide you with a lot of information and reference materials about the company and the business. They will also want to learn about you to help them determine if you can fulfil their criteria. Usually, you will be asked to fill out an application form or to submit a “Letter of Intent” stating, among others, your intended site. If you only have a general idea of your planned location, they may also suggest sites that match your preference.
Once you and the franchiser have agreed on the site, the franchisor will evaluate your chosen location as well as your suitability as a franchisee; the latter being more important than the suitability of the site. Since a franchise business is a long-term relationship, expect franchisors to be very meticulous about your credentials; from personal background to finances and business affiliations. In business terms, this is referred to as “due diligence”.
What follows is a series of follow-up meetings which tackle details about your qualifications and your plans on how to run the business. You may also be given the “Franchise Agreement” at this point for your review prior to signing. You may want to hire the services of a lawyer or a franchise consultant to advise you on the contract details and implications of certain clauses.
The signing of the contract signals the start of a long and fruitful business relationship. It signals the franchiser’s confidence about your ability to run the franchise according to their standards and expectations. Your signature on the dotted line also indicates your confidence on the viability of the business and that it’s worth your investment of time and money.
Enjoy the partnership. You should be in good hands.
Are you making money with your own franchise business or thinking about doing so? Be sure to share your comments, thoughts, ideas below…