Franchising – The Big Things You Need To KnowRamon Ray
You’ve decided to buy a franchise. Whether franchise ownership represents freedom from the corporate world, the fulfilment of a lifelong goal of business ownership or an addition to your business portfolio, investors are attracted to franchising because of the possibility of financial success. Owning a franchise can give you a tested business model with brand awareness, but success is not guaranteed.
At Franchise Gator, we offer one of the largest directories of franchise and business opportunities giving professionals a one-stop shop for business ownership information and resources.
Based on our 15 years of experience in the franchising industry, here are six ways you can set yourself up for success and reach the profits you desire.
Understand the Profitability Timeline
Do you remember the line from the movie Field of Dreams, “If you build it, they will come?” That may work for the ghosts of the 1919 White Sox but to be successful in franchising, it takes more than just opening your doors. Before you throw yourself into owning a franchise, understand how much time it will take to see a profit. While it certainly would be nice to become profitable overnight, that just isn’t realistic.
Check with the brands you are interested in purchasing a franchise from to find out how long it takes for their franchisees typically to start turning a profit. Then determine if you have adequate operating capital to see you through that period. The last thing you want to do is to invest all of your money in your dream business only to have to get out before you realize any success. Knowing what the timeline to profitability is will also help you decide which brand you should partner with.
Select the Right Stage of Maturity
Of course, investing in a well-known, established brand has major perks. They have proven systems, customers know them and they understand the challenges in their industry and can help streamline your path to profitability. Partnering with an established brand is a smart investment for those comfortable following systems without much room for innovation. It is unlikely that you’ll have much input when it comes to the direction the brand is heading.
Smaller, emerging franchise brands can be an excellent choice for those who might find fulfillment in helping to grow a brand. Many times, the first franchisees in a system are regarded as leaders by new franchise owners. If leadership and entrepreneurism are in your blood, consider a less established brand. Emerging brands won’t have the kind of reliable track record of the more mature franchise systems so it’s critical that you use your business acumen to thoroughly evaluate the business plan, leadership and overall direction of the brand.
Find a Growing Industry
Buying a video rental franchise in 2012 probably wouldn’t have been the best idea. Although popular in the 1990s, streaming video services like Netflix have made the rental model irrelevant. That’s just one example of the benefit of knowing your industry, related trends and projections for its future demand and profitability.
When researching a franchise investment, review your chosen industry’s statistics for guidance. For instance, investing in a restaurant franchise such as Rosati’s will most likely give you a higher return on investment, as approximately 93 percent of the population orders pizza on a regular basis, than you would get if you invested in a trendy kale bar. Put aside your personal tastes, and find a brand that is in demand today and will continue to be in the future.
Choose the Right Location
Location, location, location—there are few choices more crucial to your success than the location you choose. The franchise may have a solid business model, amazing support and the right amount of autonomy but if you get the location wrong you’ll be fighting an uphill battle from day one.
There are many things to consider when deciding on a location: foot and/or car traffic, the appeal of your products to the local market, distance from other franchisees and competing businesses, and even parking. These are all factors you should consider when you are scouting for the perfect location for your business. Often your franchisor will guide you in selecting your location so that you can achieve a promising ROI.
Hire the Right Employees
Now that you’ve selected your franchise and the building is going up, it is time to begin hiring. Making the right hiring decisions will give your franchise the stability it requires for success—turnover is expensive for franchise owners. Finding people who are reliable and dedicated is quite the undertaking. To maximize your profitability, look for people who have relevant work experience, do not have a track record of job hopping and can be relied on to keep your franchise running smoothly.
Pick Great Products and Services
If your products and services are subpar, you’ll find it much harder to see a return on your investment. Before you take the leap and invest in a franchise, make sure the products you are selling are quality, in demand and sell year-round, not seasonally. If your products and services are inferior, the likelihood of getting negative online reviews is pretty good. Popular, quality products will sell themselves, so carefully choose where you invest in order to maximize the profit you are expecting.
Eric Bell, General Manager, Franchise Gator
Eric Bell has 15 years of franchise industry experience and currently serves as General Manager of Franchise Gator. He began his career in 2002 as a Hollywood Tans franchisee in Atlanta where he also served as area manager and helped develop the Atlanta territory. In October 2005, Eric joined Franchise Gator as a sales representative and went on to hold several positions including sales representative, sales manager, and director of sales and service. Eric is a member of the Southeast Franchise Forum and is a Certified Franchise Executive. He resides in Georgia with his wife and their two children.