With two-thirds of all Americans eager to start their own business, many different business models are growing in popularity. Franchising — when a brand provides licenses and agreements to entrepreneurs to run a business using their name and their products and services — is one that is fast increasing.
In the United States alone, there are more than 750,000 businesses that operate on the franchise model. The model has been expanding over the past few years, and it’s not hard to see why this is the case.
Succeeding as a new entrepreneur is more assured if — rather than being another standalone start-up — you have the powerful brand recognition of an established company behind you.
As a franchisee, you’ll be able to benefit from a known product or service that customers are used to. In their eyes, going to you as a new outlet is less risky because they are accustomed to what that brand provides. Despite these advantages, starting a new franchise does not come without its challenges.
Here’s some advice for new franchise owners to help them get on track with their new venture.
1. Know Your Market — Your Franchise Depends on It
While it’s not necessary that you have multiple years of experience as a business person within the industry you choose, it’s important to have an awareness of the market you’re entering. For some, this can come from time spent working at a lower level within your chosen industry — for example, as a barista rather than a café owner. If you don’t have this, it is a good idea to talk to other franchise owners to get a feel for the industry and how your new franchise fits into it. Being aware of the market landscape is essential to having a successful business.
2. Choose Your Location Carefully
As with any brick-and-mortar business, the right location is key to your franchise. Do you know which part of town you should base your business? If you’re the owner of a franchise restaurant, perhaps a touristy part is right for you to achieve high footfall. You may want to locate in a financial or business district for the same reasons. Maybe you’ll want to target space in a shopping mall. Your franchisor may be able to help you to choose the ideal location for your business to be able to thrive.
3. Make Sure You Have a Good Team around You
Who you surround yourself with is very important. If you decide to start a franchise that will involve more than just one person, you will have to keep a very close eye on hiring. As a franchisee, your franchisor may help you with the training of new employees — this should be part of your franchise fee. A major benefit of having employees and a team in your franchise is that different people can contribute different skills to the business. As a result, you’ll be able to meld minds and achieve the goals you want for your franchise with the help of other people who possess varying and complementary skill sets.
4. Choose Where You Get Your Finance from Carefully
It’s not always easy to secure franchise finance. While every franchise opportunity will come with a franchise fee, the exact amount can vary greatly. In some circumstances, your franchisor will require you to pay the full amount at the beginning, whereas others may allow you to pay a portion up front, and spread the rest of the cost across a longer period. Some banks offer franchise finance but read the terms very carefully. Whether you use money from your own pocket, cut a deal with the franchisor, or seek funding from a bank, make sure you’re fully aware of the payment terms.