Ever think to punch your boss, and become independent? You can become franchisee of one of the great chains, even without great initial capital investment. It mostly matters to examine the chain’s reputation, advertising strategy, and whether the financial model is profitable.
Author: Eran Milo CEO, RE/MAX Thailand Master Franchise 29/4/2016
Many people dream of becoming self-employed, but not everyone possesses the required experience of starting and managing a business, which could incur severe financial losses. One possible way of doing it is via a franchise option of stable and well known store chains, in various commerce fields, which can provide support, guidance and escort along the way for managing an independent business.
The franchise path allows people to become self-employed through a brand of proven reputation and an already operating business, one which presents a proven profit potential and business outline. The franchisees receive a readymade business to their hands, along with a tight escort and training of the chain, in all areas of ongoing work and management. Those include guiding sessions that create shortcuts and can spare many mistakes that, most likely, would have happened along the way. Thus, the chain allows you to jump directly to self-employment under its wings.
Even if you are not certain in the area you’d like to deal with, in the world of franchising you can choose the field that appeals the most to you, even if you lack the experience. Another significant advantage is that, as part of the chain, the franchisee holds a tremendous buying power that manifests itself at the stage of starting the business, in faster receiving of service and goods from architects, contractors, signage and so forth.
In addition, it comes to evident in the ongoing operation of the business, and stocking at very low rates thanks to the chain’s strong buying power. So if you’d like to become franchisees – following are the most significant advantages of Chain Franchising, and some useful tips:
Well known store chains have an already existing reputation, and so before anything else it’s vital to look into it – what do the existing customers and the potential ones think about the product or the service. It’s important to check how many years the chain is active and operational, where the recommended minimum is 4-5 years, and of course how many active branches it has (the minimum is 6-10 branches in a national spread). It’s also important to check the franchisees’ reputation, and consult with them.
If the chain has an international exposure it would be an immense advantage.
When going independent via the franchising path you don’t have to invest a significant amount of your own capital (depends on the type of franchise), but it’s important to make sure you have at least 50-60% of the investment amount.
It’s important to check with the chain how much time, on average, it takes to return the investment.
Every business is run by people, it’s important to choose a chain that provides you with the full coverage of all the required knowledge. You should check the training processes of the chain, and your commitment to meet the standards and the goals. Is there a training system for employees and managers?
The management system of the chain includes advanced management interfaces for ongoing management of the business, training manuals and running systems for salaries management, manpower management and costumers service. The chain is experienced and skilled, and typically chains develop a management system that is suitable for the chain branches. A new franchisee doesn’t need to start building one from scratch, while making errors along his way to a working management interfaces. And so, it’s important to check before contracting with the chain that the management layout is skilled and of good quality.
Marketing and Advertising
Chains typically work with advertisers and marketers in various media channels, and so, franchisees can benefit from a large exposure via advertisements and marketing, solely for being connected with the chain. Obviously, it’s important to check which media channels the chain is advertising in, how it is performed, and the advertisement strategy and budgets as well.
Store chains have a financial model that was built according to the chain’s experience, and using expert advisors. This model allows the franchisee to conduct a feasibility check (“Go / No Go”), to consider initial costs, operational costs and profitability. It’s important that the franchisee will check if the financial model is profitable enough, and that the existing trading conditions are good. The advantage is that when an inexperienced individual enters this world, he can assess his profit margins and the general financial outlook of this business, which are very significant to self-employees.
- Operational Model – Check that the model is simple and easy to operate – it’s important to distinguish between operational model of a product and a service.
- Chain Owners – It’s imperative to have a meeting with the chain owners and the management prior to purchasing the franchise, since interpersonal chemistry is of high significance further down the road. A chain is like a family that escorts every franchisee along his way.
- Area of Commerce – If you focus on a certain area of commerce, it’s important to look into several chains that deal with it. If you are focus on the Area of Service, you will need to look if the service has demand in your area.
- Franchise Contract – When you receive the franchise contract copy it’s important to examine all the details thoroughly, such as contract period, regular payments, cancellation option, and franchisee’s commitments. If the business proves successful, you would most likely want to secure an option to extend the contract further.
- Profit Potential – You need to check the numbers; it may happen that in your area the numbers won’t work the same way has the chain will show you.
you want to see if the chain has any market research regarding your area and the potential profit.