If you are considering buying a franchise, you have just made your first smart business decision, congratulations! You may or may not be aware that New Zealand and Australia are the most franchised countries in the world per-capita, we are an entrepreneurial bunch, and importantly, understand the inherent advantages that being part of a franchise system provides. Established and proven operating systems, training across all areas of business operations and marketing support are just some of the reasons that franchises have a significantly lower failure rate than independent businesses in their first 5 years. We have listed below some of the advantages you can expect as a franchisee as well as things you need to consider when choosing the right franchise system for you.
One of the core aspects of a successful franchise are the operational systems. These operating systems are the tried and tested structures that, if followed, will significantly increase the likelihood of success in your franchise. Franchisors develop operational systems that are unique to their business model and proven to be the most effective in the day to day and overall business operation within their particular market.
Operational support means that even though you are starting in your own business, you are never alone. Franchisors will have an experienced team of people always on call for any questions or issues you may be having. Not only is this a huge advantage in the start-up stage of your business, but the ongoing support means that there is always someone to talk to and discuss ideas and strategies for the continued success of your business.
Starting a business from scratch means the long and arduous journey of building a brand that represents value and purpose as soon as the product name is mentioned, or the company logo is seen by potential consumers. Buying into a quality franchised company means two things:
- The brand name already has a presence in the market or community. Consumers are more likely to use a product or service that can demonstrate it is fit for purpose and is being utilised by others customers.
- Most franchisors’ top function is to ensure that the brand name is strong and continually growing on a local and national scale. Franchisees are also given strategies and ongoing support for advertising and marketing campaigns that have proven to be the most effective.
Marketing strategies and budgets are a large part of business growth and if you are not familiar with this area, the marketing possibilities can seem quite daunting and mistakes can be costly. Franchisors will have a tried and tested marketing strategy and support in place for national and local marketing and are there to help you maximise opportunities for growth. Afterall, in a franchise system, the franchisor only succeeds when their franchisees do.
In a quality franchised company, there will always be formal and informal training available to you as a franchisee.
Initial training – When you come on board as a franchisee, this is the training that will provide you with the in-depth knowledge and skills required to run a successful business.
Site visits – Most franchisors will visit franchisees periodically to gauge how they are travelling, what is working, and what areas of further training may be needed. These are valuable opportunities and should be welcomed by franchisees.
Up-skilling – This type of training is usually designed to specifically target areas that an individual, group or all franchisees need to learn. This may be an aspect of the business that needs strengthening, or on something new that has been released by head office that requires specific training.
There is always risk in starting a new business, however, when looking at the options of starting your own business or buying a franchised business, the level of risk can be significantly reduced. The risk of buying a franchised business means that the product and service you will be providing is valued by consumers. It also means that the business model is already a proven success if systems are followed.
Investing in a business that holds a passion or interest to you is a big part of finding the right franchise. You may have a strong set of skills or experience in a particular industry that will be easily applicable in your own business. Trades are a great example of where a skill and experience is easily transferable into a small business.
This is an important question as it will help narrow down your choices depending on desired income and required time investment.
Some people look at purchasing a franchise as a career choice. This will mean that they have a significant amount of time available to run the business and will be looking at potential earnings high enough to rely on as a sole income.
Other franchises can be run as a small side business. These businesses can be run on a much smaller time investment requirement and are more flexible to suit the lifestyle of people with a primary occupation. The earning potential in these businesses can still be significant, but will depend more on the hours and time you would be willing to dedicate.
Franchised business can ask for anywhere from $5000 to above $1,000,000 as an initial buy in, so being realistic about the investment that you can afford to make will help narrow the field of choice. When looking at this factor, remember to research what the expected earning potential is in the first, second and third year etc. to help you gauge how long it will be before you have earned this initial cost back in your income. Whilst some people buy franchises to supplement their income, a lot of potential buyers are replacing an existing income with their new business so building income as quickly as possible is an important thing to consider. You should also consider that you may need to have adequate funds to support yourself for the first 5 - 12 months while the business builds.
This question will help you decide whether you are looking at a business where you are the sole operator or if you are looking at starting a business that will need a number of staff on board on a regular basis. There are positives to both options but it is really a matter of where you are the most comfortable. If you are a social person and enjoy being in a dynamic workplace, then working as a sole operator may make you feel isolated and therefore not right for you. If you enjoy the independence and freedom that comes from owning and running your business without staff, then a work environment with a lot of people and no down time may be a business that you may not enjoy.
This question is something that you need to be realistic and honest about from the beginning. If you have a lifestyle that leaves you with a couple of hours a day to invest in your business, then you should look at a business that can be run with those requirements. Making sure that you choose a franchise that fits your time investment requirements is very important. Underestimating the time required by you in the day-to-day running of your business will have serious consequences to your earning potential. Some franchisors require that you are employed full time in your business and this will be contractually covered in the franchise agreement.
Everyone gets into business with different objectives, whether it be as a long-term career choice, or as an investment with the intention of building an asset and selling within a certain number of years. Understanding what the end-goal is for your franchise journey is an important part of narrowing down which franchise opportunity is right for you. There will be franchisors that encourage building an asset for future sale, and there will be franchisors who are looking for a long-term relationship and may impose penalties for early sale within the Franchise Agreement. It will be important to discuss your ideas with any prospective franchisors.
The process of evaluating the franchise opportunity can take up to 8 weeks and its important that you don't rush it. You must also take into account you will likely incur costs during the process for your travel and accommodation for the days and times that you’re required to visit the franchise head office for interviews and assessments. There is also the cost of your time in participating in the selection process as you may need to take time off work.
It is also important to remember that both parties can decide not to proceed at any stage prior to signing the Franchise Agreement without having to give a reason. The process is designed to be thorough so that both parties can feel comfortable in entering a professional business relationship as franchisee and franchisor.
Every franchisor is looking for the best fit for their company when bringing on new franchisees. Despite each industry and each business being different, there are vital characteristics that all franchisors are looking for when bringing on a new member to the franchise team. A franchisee should have: