Franchise means “the right or license granted by a company to an individual or group to market its products or services in a specific territory.” according to the dictionary.com. Basically, it is the privilege to buy a developed eco system for your business. If you want to be a business owner and don’t have time and skills to set the rules by yourself, buying a franchise is the best option for you. Whether you plan to open a food store, car washing company or menswear store, you will have many more advantages compared to your local competitors. Franchising means there is an established brand value, the rules are determined for every part of your organization and most likely there is already an audience ready to become your customer. However, there are disadvantages to buy franchises as well. If you are not good with following the rules and want to make your own rules than franchising may not be the best model for you. Moreover, there are additional costs incoming with franchising such a yearly annual fee and initial investment for the brand value.
As in every business decision, you need carefully study the details on your business plan. If you decided that buying a franchise is the best option for you than you need get into the details of studying the franchising brand, local demands, competition and financial aspects of the franchise. Whether you are looking to open a global chain restaurant or a dry cleaner, you need to make sure it will be worthwhile for your time and money. Intdealers experts put together 5 essential steps for you to follow to open the store of your dreams:
1. Supply and Demand. Who is your target audience and what do they need?
a. In Business 101, supply and demand is taught as the very first lesson for future entrepreneurs. You need to study the location of the store you are planning to open. Is there a suitable audience ready to buy your products/services if you open this franchise store? Depending on the business segment you are in, you need to study the income level of the neighborhood, gender, age and educational level of your potential visitors. Is the franchise you plan to buy, answering to the demands of the neighborhood.
2. Financial Plan – Profitability is the Key!
a. Before owning a franchise, you need to be aware of your all the financial aspects of your business. What is the initial investment required to obtain the franchise, what will be your fixed and variable costs for running the brand and how profitable is this business for you. Most of the entrepreneurs makes mistake by mixing the revenue and the profit. If the business is not profitable, it doesn’t matter if your are making 1 million dolar revenue per year. The studies show that companies who value profitability more than revenue have much higher changes to be successful in the long run. The key question here is that can you sell your products / services at the price you wish for.
3. Put the A-Team Together!
a. Now you have studied all the economic aspects of your future business everything seems fit but how are you going to operate the business is another important questions for entrepreneurs. You need to make sure you look for the right members to your team at the required skill levels and the costs of this team will not be burning you out after 3 months. Before making the investment, you need to study carefully what kind of employee skills required to run the franchise and will be able to afford the costs.
4. Competition Analysis
a. It is essential to study your future competitors before owning a franchise. After you decide about the location, you need to make a good analysis of the local and global market. Who is your competitors once you open the store? What are their advantages against you and how do you plan to distinguish yourself from many other alternatives which the consumer can choose from.
5. Accounting and Law Advisors:
a. You will be making a big investment to build the business of your dreams and for that you need trustable and skilled experts to consult with. Every country has different accounting and trading laws therefore you need to get constant consultancy services from a corporate lawyer and professional accountant. The law advisor can also help you out with the franchising agreements, business laws, your responsibilities to your employees and many other topics. Accountant is also another key person in your organization to protect you by making mistakes and getting high fines from authorities in terms of taxing and legal documentation.
Every business requires different measures and conditions. Therefore, it is critical to study every detail possible and consider the risks before making the decision for an investment. We are also ready to help you for your further questions and ideas.
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