Franchising has been around for a long time and can be a very successful way of growing your business. But it is not as easy as just buying the rights to use a brand name. There are many things that you need to consider before making the decision. If you are interested in buying into a retail franchise, read on for 10 questions that will help you get started.
1. What is a franchise?
A franchise, or franchising, is a system in which an individual or company (called a franchisee) pays an initial fee and a continuing royalty fee for the right to market and sell products or services under a trademark owned by another company (called a franchisor).While franchising differs from joint venture (JV) in that there is no formal agreement between the joint venture (JV) company and the franchisor, there are often similarities as they are often similar businesses with similar assets and hopes for growth. Similar to a JV, a franchisee and franchisor are typically partners who find each other through a networking channel, such as by joining a digital marketing platform or a local business networking group, and agree to a set of guidelines and terms. While some people prefer JVs, many people prefer establishing a franchise.
And in certain cases such as where a company’s products are in high demand, a franchisee is the ideal partner. Below are the 10 key questions to ask yourself before deciding whether you want to start a franchise (be advised that there are quite a few) or form your own. Question #1: What kind of brand are you trying to build? A brand is a name, slogan, image, or identity that is related to a category of products or services. If you’re in the business of clothing, your brand could be J. Crew or Banana Republic. But it’s not always easy to identify your brand. Sometimes you’ll have to be the one to identify your brand. Even if you don’t have a name, your business vertical is a strong brand that can be notable. Question #2: Would you buy this business if you were it? What if you were JCPenney, Gucci, or REI? While brands are not new, they have relatively high barriers to entry. Also, some brands may have been around for years and gained popular brands that are well established.
2. How much does a franchise cost?
A franchise is a type of business ownership where an established company grants permission to an individual or group to start a new business using its name, brand, and other assets. The parent company typically retains some level of control over franchisees and also receives a fee from them.10 Questions When Looking To Franchise 1. Who is the brand trying to attract? There is no one “perfect” demographic that franchises are designed for. For example, MyFitnessPal is targeting a wide range of people from distance runners to endurance athletes. Hotels.com targets travelers who want to stay at minimal cost, as well as those looking for a unique experience. However, there are certain characteristics that tend to resonate with certain demographics more than others.
MyFitnessPal market research aimed to better understand what consumers associate with the MyFitnessPal brand. One of the most exciting and important findings was the remarkably low favorite of everyoneComfort Foods targeted with a home delivery campaign around this subject. A Comfy Foods analysis of what consumers would prefer to do from home: read a book, post pictures of workouts on social media, or cook a dinner is worth noting here. You may also have the opportunity to approach your prospective franchisee upsell opportunities or build the ecosystem around the brand. If you are running an ecommerce store, you can make it as easy or complicated as you like. If you run a local business, consider how it fits into your community. And ultimately people do business with people they like, which makes knowing company demographics really important. 2. What can you promise that the competition cannot? Even if a leading competitor is using the exact same product as you, there are some things you can offer that set you apart. One of the defining characteristics of the Microsoft Windows operating system is that it remains familiar to users even if Microsoft has given up trying to sell it as a completely new product.
3. What are the advantages of buying a franchise?
The biggest advantage of buying a franchise is that you have an existing business with an established system, brand and customer base. When you buy a franchise, you’re buying into an existing business model that’s already been tested and has a proven track record of success. With that in mind, here are 10 questions you should ask yourself before you decide to purchase your next franchise.
4. Are there any disadvantages to buying a franchise?
If you’re thinking about buying a franchise, there are a few disadvantages to consider. For example, franchisees don’t usually have much say in the way the business is run. They also have to pay a franchise fee, which can be expensive and can also eat into profits. Also, franchises are typically more expensive than starting a business on your own.On the other hand, there are benefits. For one thing, it is possible to build a profitable business without any experience, as franchises always offer tenants and owners who are looking for business. You can also get started faster, as there are many franchisors who will mentor you while you build your business. Franchisors can operate outside of your home market if you start making enough connections.
Lastly, franchisors tend to have better information about specific locations. When considering purchasing a franchise, you should consider everything—from location to sales to marketing. Here are the 10 most important items to consider before starting your franchise journey.5 Questions to Ask BEFORE Acquiring a Franchise 1. Why franchises? Franchisors offer investors an opportunity to expand their portfolio. Franchisees are interested in diversifying their revenue stream and looking for franchisor opportunities because the fees that they pay are usually cheaper than an individual owner. If you’re interested in buying a store, you’ll also have to pay franchise fees up front. It is advisable to make the decision on long-term goals, as this will help prevent you from buying just for the sake of a franchise. Also, franchises can introduce new customers to your brand. Franchisees are often very knowledgeable about your brand, your products, and your target market. They can serve as great sources of marketing for your company. Franchisors can explain many happenings related to your niche. 2. Where will the business office be located? This is really a basic business location question. There are several factors that can impact where the franchisor and franchisee will build their business office. For example, if you own locations in different states, this will affect several things.
Franchising is an exciting opportunity, but it’s not a “get rich quick” scheme. Before making the investment, make sure you’re well-informed about what you’re getting into!