Starting a business isn’t easy because you have to build public awareness and establish your brand. While it is a struggle to get noticed, many entrepreneurs do it every day. If you are looking for a business opportunity to purchase the rights to operate your own business under an established brand, then being a franchisee is the answer.
There are many things to consider when looking into franchises, and you need to take the time to see what is the best fit for you. Owning a franchise business can be a rewarding experience. Plus, it comes with a significant profit potential if you turn the company into a success.
Here is what to expect from owning a franchise business.
You are only renting the business.
When you enter into a franchising agreement, that means you have acquired the rights to use the intellectual property of the original business in exchange for a fee and royalties for a set period.
Most franchise agreements are for 5-10 years, with renewals after that. Hopefully, you will run your location and profit from it (hopefully) but never own the business itself, only your franchise.
You have to abide by the franchising agreement.
Opening up your place gives you the freedom to do whatever you want. You can sell anything and set up your storefront the way you like because it’s your business. When owning a franchise business, you must abide by the agreement terms exactly.
This means that you need to follow the details written in the contract, including training and procedures, advertising and staffing and the products you can market. The franchise agreement will include several provisions:
- Franchise Fee This is the initial cost to buy the franchise.
- Royalty Fees These are fees paid monthly as a percentage of gross sales.
- Operational Procedures You will get an operations manual outlining the company’s mission statement, values, roles of both parties, policies and standards, marketing and advertising initiatives, and other business model aspects.
- Training Your franchiser will train you in the business’s operations, including service and recipes, hiring and training staff, supplier relations, and assistance with the original build-out.
Some additional provisions may include:
- Rights Granted What you are legally allowed as laid out in the contract.
- Length Of Term With Renewal Specifications Typically 5-10 years with auto-renewals.
- Termination Conditions Causes for terminating the contract if it is breached in any way.
- Post-Term Requirements Legal assurances that all equipment is returned and trade secrets kept confidential. Also, there may be a non-compete clause included.
- Territory This is the area you may select as your physical business location.
Several other clauses may be included in your contract, so make sure you understand them all.
The franchise’s success depends on your hard work.
You might think that operating a franchise is easy because the original location is successful. Success isn’t an accident. It takes hard work and focus, so you need to be prepared to work long hours.
A franchise can fail just like any other business, so it’s up to you to prevent that from happening. Follow what the original store does because they have figured out what works and doesn’t. That’s part of the reason you bought the franchise, probably. Bust your butt, and don’t be afraid to call the owner for advice and support. They want you to succeed as much as you do.
Franchise expenses can be high.
There are many costs to starting a business, and owning a franchise increases expenses. You have build-out costs, franchise costs, royalty fees, advertising and supplies to factor in. Then you need to pay utilities and staff as well as taxes. It can add up quickly, so be prepared for long-term business debt.
Debt isn’t necessarily a bad thing as long as you can manage it, and you should be able to make a decent salary for your work. Make sure you can take on this business and support your family financially.
Expect to be busy managing a franchise business.
When owning a franchise business, you should be ready for a busy place from day one. You have bought into a recognized brand, so people will already trust your product and want to buy from you. This is your dream scenario, but it can also be overwhelming.
Make sure you know the operations forwards and backwards and have a fully-trained staff to handle a brisk business. There will be a learning curve, but you should handle it as long as you are prepared.
Opening up a franchise business is exciting and comes with instant recognition. You get to belong to a popular brand, so make sure you represent it well. When you make your location a hit, your franchiser will be excited and want to help you become more profitable. That is the best thing you can hope for, so go out and make yourself a success.