Starting any type of business from the ground up can be a huge challenge. That challenge is compounded when you are considering a marketplace that is already crowded with competition such as the fast food industry. This is why investing in a franchise might be a smarter financial move. A franchise business will provide a proven business model and the support of the parent company. They want you to succeed because that further strengthens their brand. Although there are many advantages to investing in a franchise business, they are by no means a “slam dunk” when it comes to guaranteed success. Here are seven things you should become familiar with before starting a franchise.
Know Your Market
A franchise has a built-in customer base that is familiar with their product. That doesn’t mean all the work is done with regard to research and development. Just because everyone knows which eatery makes the best-fried chicken and which one serves up the best sandwiches doesn’t mean you’ll be in a location that will attract that clientele.
For instance, if you were to open a hamburger franchise across from a college campus that has gone strictly vegan, then you would find that your business will suffer. It might even be the subject of protests. That is an extreme case but it points out the importance of understanding a community. Introducing a new type of cuisine would be challenging in an area that has never experienced that cuisine. Not only would you have to educate your potentials customers about the cuisine, but you would also have to convince them to try your franchise. That is a lot of work for what should be an established brand.
A franchise supports the parent company by paying fees back to that company. In return, the parent company provides support in the form of marketing and branding. The major television spot for a fast food restaurant is never location specific. It applies to all of the franchises. That’s a huge benefit. It is also one you’ll be paying for in the form of those fees.
Just because you’re providing a revenue stream to the parent company doesn’t mean they are footing the bill for your franchise. You will need to put up the money to get the business started, make inventory purchases and have working capital on hand to pay salaries and any lease agreements. The costs of that investment will vary and depends on the franchise itself. Yes, you will be paying for the privilege of paying a company.
The Amount of Time
Starting a franchise is not the same as renting a property. With a property, you can make a minimal investment of time and still collect that rent check every month. At a franchise, you could end up spending long hours not only with the day-to-day operations but also all the training and bookkeeping. The goal will be to hire a management staff that can take on the burden of running the operation. However, it will still fall on your shoulders to ensure things are running properly. You don’t want to be handed off. You’ll find that until the business is up and running, you could be spending more time working here then you were at your previous job.
Understanding How the Operation Works
As a franchise owner, you are expected to know everything about that franchise down to the smallest detail. That might only come from actual hands-on experience. Many franchisors will put prospective investors through intense training classes that include work in an actual business that is up and running. That will certainly be a benefit, but it might not be enough. If possible, then you should consider devoting a few months to working in an established franchise. You don’t have to be “undercover” to find out what is really going on.
Even after all the training, research and hands-on work, you are still going to be challenged at your franchise business. The first months of the operation will be demanding. However, you should look towards the success of other franchise owners. Most of them have invested in several franchises. Once you understand how it all works, you’ll be able to expand.