Launching a small business is much easier said than done. There are a lot of people with an entrepreneurial mindset who would love to become business owners. The only thing holding them back is they don’t have a business idea in which they believe.
Becoming a franchisee is a great way to get your feet wet as a business owner if you don’t have an idea for your own business. There are plenty of benefits to franchise opportunities like having the backing of a large corporation, a ready-made business model, and a thriving customer base. However, there are some things potential franchisees should know about running a franchise, which we’ll cover here.
What is your plan for your business?
The first thing you should do when launching your own business is to write a business plan. You may think business plans are only for startups, but nothing could be further from the truth. Indeed, franchisors already have a business model for prospective franchisees to follow, but a business model and business plan are different things.
Your business plan should include details such as how and when you expect to become profitable. The planning phase is all about envisioning the future of your franchise. Do you plan on expanding and opening more franchises? Do you want to become the leading franchisee in your market area? Well, that requires planning, advises Matt Frauenshuh, a franchise business owner.
Matthew D. Frauenshuh is the Chief Executive Officer of Fourteen Foods and Double Seven Development. Fourteen Foods was founded in 2002 with the opening of one Dairy Queen Grill & Chill restaurant in Minnesota.
Matt earned a bachelor’s degree in business economics from St. Olaf College and an MBA from the University of Minnesota’s Carlson School of Management. He currently lives in Greenwood, Minnesota with his wife Beth, daughter Katherine and sons August and Maxwell.
What is the initial cost for purchasing a franchise?
There are always franchises for sale, but their prices depend on the size of the franchise. For instance, a company like McDonald’s with universal brand recognition might charge more than a new franchise where you can get in on the ground floor.
Indeed, franchise prices vary from one franchisor to another. However, the good news is that after you pay your franchise fees, you don’t have much of a financial obligation as you share development costs with the franchisor. Plus, having a profitable business model helps franchisors make their money back much quicker than most business owners.
Is there a demand for your franchise in your market area?
One of the most important things for potential franchise owners to consider is the market for their franchise in their market area. For instance, you wouldn’t want to open a UPS Store in a neighborhood where there’s already a successful UPS store—not even in a megacity like New York.
You’re going to be the new owner on the block no matter where you place your franchise. You don’t want the added challenge of competing against another franchisee with the same business as you.
Performing market research is the best way to gauge the market for your franchise. You can get an idea of who your competitors are and even their market share.
What type of insurance do you need?
One of your biggest responsibilities as a franchise owner is the safety of everyone who enters your business. Something as simple as a hard fall on a wet floor could mean big trouble for your business.
Insuring a commercial building can be difficult when it’s a multi-purpose building like an apartment building housing commercial tenants. If you’re a building owner with a clothing boutique or UPS Store on the bottom floor and residential units above it, you need mixed-use insurance. It’s the only way to have peace of mind that your entire building is covered for everything from vandalism to personal injuries.
Do you have to work at your franchise or have previous experience?
Different franchisors have different requirements for potential franchisees. For instance, many national and international franchises require prospective franchise owners to have a few years of experience working in their stores. This ensures that franchise owners know the business inside and out, from the most minute tasks to executive responsibilities.
Being a franchisee is much different from starting your own business from scratch. However, it takes hard work and an entrepreneurial spirit to make your establishment the best franchise possible. Learning the ins and outs of launching a franchise is critical to building a successful enterprise.