There’s this anxiety when you are about to start a new page in the enterprise world: “What if I can’t take the risk of starting a business from scratch? What if, instead of earning profits, I end up losing money?” Then due to that concern, you start to think of opening a franchise business.
This business allows you to earn money by opening an established business from the owner legally. It’s a good option. However, before deciding whether it’s good for you or not, there are 5 considerations to think about.
Does it go along with your passion?
Buying a franchise means that you should be ready to accept and follow all the rules and processes that the franchisor has set up. It includes financial management, promotion ideas, hiring criteria, marketing, customer service, and more
The parent company of the franchise that you buy also the only party who can make a big decision. The benefit is the sense of security and stability of your company.
However, you will have to sacrifice your creativity, passion, and vision that does not align with your franchisor. So, if you’re a person who wants independence, space for you to experiment, and no restriction, a franchise is not the best fit for you.
Market demand and opportunity
You can learn the market opportunity from the franchisor’s market reach and their growth and expansion plan.
From that point, start to think about how you can stick with the supply and demand principal. But before we get to that point, ask yourself these questions:
- Is there any demand for the products or services that you’d like to sell?
- How is the business landscape in that area? What kind of businesses are there?
- Who is your targetted demography?
- Is the demography available in that area?
- How is the consumer buying behavior there?
- Is the product or service that you sell seasonal?
- Does your business has the evergreen existent probability?
Other than that, you should also discuss the benefit you will receive if you open the franchise in that area with your franchisor. If possible, ask them to give you exclusivity so that there’s no room for unnecessary competition.
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Calculate the cost
Just like growing your independent business, you should calculate how much you will gain from purchasing the franchise. First, let’s calculate the fees to buy the franchise. It will vary depending on the industry. A franchise of hotels will not cost the same as F&B businesses. So, make sure you’ve conducted in-depth research about the industry.
If you have your eyes on a particular brand, ask them if they offer financial support. Some brands usually provide it or they can suggest you seek financial support with minimal effort elsewhere.
After knowing the cost to start, you have to calculate the cost for daily operations. It includes royalties, marketing costs, space lease, inventory, and more.
Understand the benefits and risks
Choosing to open a franchise does not mean you are free from risk or bankruptcy. Although there is no mitigation plan that will completely save your business, you still need to consider all the worst possibilities to minimize its potential loss.
Therefore, before you sign a contract, step back, and think about the obligations, opportunity, and how you’ve handled past crises. You should be confident about your ability in handling problems if the time comes.
Also, along the way, you will find opportunities and benefits. You’ll be challenged to think strategically about whether to take it or leave it because, well, it might not benefit you.
There is no way gigantic franchise businesses work manually. That’s why the franchisor might ask you to prepare technology such as business management software that helps to manage your company operations. It’s either they have their software standard or they leave it to you, as long as the objectives are met.
Some franchisors might ask you to centralize customer management, finance, marketing, customer service, etc. It helps them with better surveillance.
Even if they don’t ask for it, it’s recommended for you to use it. Such software helps you combat the bottlenecks and grow your business more easily.
So? What’s your idea about opening a franchise business? Are you ready for it? No need to worry because it’s better for you to completely think about it rather than living in regret in the future! We hope you find a business that suits you well!