10 questions that should be answered before launching a franchise
With franchising, as with a marriage, do not rush. There is a high probability that no one will want to work under your brand, so you should be careful and think in detail about how to properly launch your brand franchise.
Put in the budget the full cost of the business, the cost of paperwork from lawyers, financial planning. True and this can not protect you from difficulties.But if you plan everything correctly, your brand may very soon be the next Supercuts or Subway.
Entrepreneur offers to answer 10 basic questions that will help you figure out whether you are ready to launch franchising.
1. What information resources should be seen before starting work?
Joel Libava, a professional franchise consultant and author of the article “Becoming a Franchise Owner”, advises to seek help from companies that specialize in franchising or consultants who help businesses run franchises. They can cool your passion a little and help you find potential franchisees when you are ready for this. Just remember, such assistance will cost you not so cheap.
You can also ask for help from the International Franchise Association, which can also help to deal with various nuances. The organization offers many free and paid online learning resources.
2. How much do you plan to allocate for the launch?
“The initial amount may be completely different: both $ 1 thousand and more than $ 150 thousand UAH. To make the final amount not perplexing, from the first day calculate all possible expenses and think over all the details,” says Joel Libava.
Do not forget that turning a big business into a big franchise is not cheap. And, if you really decide to succeed, now is not the time to save.
You will have to seriously invest in consulting, designing a franchise, its location, construction and equipment. Then you have to pay for the initial arrangement and insurance. The list of expenses seems endless.
3. How much is my share in the franchise?
Initially, write down what your percentage of the franchise will be, how much you will earn on your brand. This is pre-agreed and usually amounts to 4-6% of the profits, although some raise their share to 25%. Joel Libava notes that 5% is quite a normal fee for using the brand.
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Typically, the franchisee pays a monthly share to the owner of the main business. You can also ask for a one-time fee for the purchase of a franchise. The amount most often includes the cost of entering the business, the purchase of a license and the use of the brand. The cost of a franchise can be completely different and depends on what package of services you provide and the size of the business.
4. How much can I earn?
There is no single figure for all. Profitability will depend on how popular your franchise will be. Nevertheless, in order to clarify a little Mr. Libava suggests calculating how many franchisees there are, how much profit each of them brings each month and calculate how much it is possible to make money on it in a year.
5. What you need to learn about the legal regulation of activities?
Franchising is surrounded by many legal issues. It is best to consult an experienced lawyer who is well versed in the field of franchising.
6. What documents must be provided to a potential franchisee?
Your potential partners need to have enough information to decide if they are really ready to work under your brand. Therefore, before concluding a transaction, you must provide maximum information so that the franchisee can make a decision on the purchase of a franchise.
7. How to attract potential franchisees?
One of the best ways is a clear explanation on your website and in your advertising that people can win by investing in your brand. It is also worth becoming a regular participant in various exhibitions, where you can tell in detail about your activities.
You can also find a professional who will sell your business. Founder and CEO of iFranchise Group, Mark Siebert says that he is ready to pay a serious amount to those who successfully sell his business.
Advertising a franchise is the best option for collaboration.
“Do not imagine yourself as the owner of a franchise. That will constantly indicate how and what to do better. Convince potential franchisees that you are open to cooperation and will constantly interact with them,” says Mark Siebert.
