What You Need to Know Before Becoming a Franchise Owner
Starting a business from scratch is often too demanding. It requires a lot of time, nerves, money and endless amounts of energy. Sometimes even your assets are at stake. And yet nobody can guarantee it will be a success.
Franchise owners usually don’t sweat that much. However, people easily get fooled and don’t expect they will work their tails off to make it running. Nevertheless, there are numerous advantages to opening a franchise we will explain things you need to know before starting a franchise business.
What Is Actually a Franchise?
In essence, a franchise is permission or license. You get to use name, products, trademark and much more of the business that already exists. There are two sides of the agreement – franchisor and franchisee. A franchisor is a party which sells its brand, while the party taking the franchise is called a franchisee. Once the agreement is signed, the franchisee can have all the benefits of the franchisor’s brand. Most famous franchises are in the food industry: McDonald’s, Burger King, Pizza Hut.
What Franchise to Choose?
In fact, the very first question you should ask yourself is: Am I the right person to become a franchisee? The biggest mistake you can make is trying to buy a franchise when you are not compatible with the business. We all have different personalities and some of us are just not for this type of business.
Do you need to be passionate about food to successfully run a restaurant? As a matter of fact, no. As a business owner, your role is to organize the job. You won’t prepare and serve meals as well as wash the dishes and clean all by yourself. These tasks should be performed by the employees you will hire. Understanding the function of a franchisee will help you set things the right way. Before making a final decision, consider several options and contact the owners to see what conditions they offer.
How Much Time Should You Invest?
Not all franchises are the same, thus the overall effort you need to invest differs. However, although you are not starting from scratch don’t expect to work less than 8 hours a day. Sometimes you will need to spend twice that time since some seasons may be harder than others. Expect to sweat a lot, especially at the beginning. After all, this is your business that you are trying to make it successful. If you have strongly decided to become a franchisee (see the paragraph above) you already know all the responsibilities this role brings.
How Much Does It Cost?
Financial requirements are different for every company, but they generally include:
- Franchise fee
- Legal fees
- Accounting fees
- Build-out costs
- Working capital
- Supplies & Inventory
- Training-related costs.
Franchise fees will definitely be among the most important factors when choosing the business. They are usually between $20,000 and $50,000, but there some exceptions that go below $20,000. What does a franchise fee cover? Again, it may differ from company to company but it commonly includes support, training and site selection. Make sure you read the contract carefully before signing and understand what you get for the money. This way you can determine the expectations from a franchisor and avoid unpleasant surprises in the future.
Can You Expect Support from a Franchisor?
If you carefully read the last paragraph you could notice words such as training and support. Yes, you can support from a franchisor to the extent mentioned in the contract. As a business owner, you can expect full training on how to run a franchise. Normally, companies organize training for future employees as well. However, keep in mind that training costs are part of the franchise fee but not the travel expenses and living costs during the training.
When things start going wrong, a franchisor should there with the advice to make sure everything goes smoothly. Get in touch with other franchisees of the same company and ask them about their experience with a franchisor. One of the advantages over starting a business from scratch is there is a big brother to watch over you. All in all, a franchise should be a win-win game and both sides need to put an effort to create a successful business.