The idea of being your own boss and building your own empire from a simple yet creative product is more than just an attractive prospect. There’s always this one big problem though – how and where to start? Starting a franchise is one quick way to that path.
Any business undertaking is always a huge decision that comes with enormous risks. Franchising is similar. It is a complex model. However, with proper preparation, commitment, careful research and due diligence in gathering key franchise information, success is just a stone’s throw away.
What is a Franchise?
To put things into order, let’s define a franchise into a layman’s perspective. A franchise is simply an agreement between two parties: the franchisee and the franchisor.
The franchisor allows the franchisee to market its own product or services utilizing the operating methods and using the brand and/or trademark of the franchisor. The two types of this agreement are below:
- Business Format Franchising – this is a franchise method where the franchisor grants rights to the franchisee to use its trademarks and logos as well as a proven turn-key system to run the business.
The franchisor will provide help to the franchisee in terms of store design and layout, selection of the site, recruiting and training the staff, business marketing, preferred suppliers, and a lot more.
The franchisee in return will have to pay an upfront fee in return for the franchisor’s help. The franchisee will also need to pay ongoing royalties to the franchisor. The royalties help the franchisor to continue earning at the same time develop its business system, marketing strategy, product or services, market research, and steady-state support system.
This type of franchising method is more common with the coffee franchises, retail franchises, food franchises, and so forth.
- Product and Trade Name Franchising – this is a franchise method that doesn’t require payment of royalties. The franchisee is only required to purchase products or services or a range of it exclusively from the franchisor.
The franchisor, on the other hand, is only responsible for providing the product. At a higher level, the franchisor provides wide-area or national marketing campaigns, universal advertising, trademarks, and logos.
This type of franchising method is commonly used in soft drink distribution and petroleum industries.
Starting the Business
Now that you have a basic understanding of what a franchise is and how it works, you’re ready to start the business. Remember, being a beginner is not a hindrance to starting a successful franchise. There’s a checklist that we have prepared to help prepare you in your journey.
Research is critical when starting a business. This tops the list of our checklist. As a beginner, it is crucial to invest a lot of time with research. Looking into the industry that you are planning to enter as well as studying the potential of your product or service is key. There are two types of studies that you will need to undertake.
- Feasibility study: this is an assessment of your proposed method or plan for the business. This looks into how your business will operate and potentially successful or sustainable it can be.
- Profitability study: this is an assessment of how profitable your proposed product or service can be and how your business will perform within the franchise model.
2. Product or Service
Turning your simple idea into a viable product or service is perhaps the core of the franchise business. Employ a lot of creativity into the thought process to come up with a unique and engaging product or service that customers and entrepreneurs will love.
Capital is key to sustainability. It is not only required to stand up the business, but it is also required to keep it moving. You will need to have more than enough capital, money or assets, to launch a powerful product or service.
Identifying and understanding your market is also critical to establish your product. Knowing what your market’s preference is, what their likes and dislikes are, and how they react will enable you to build an effective business model that will address your market’s needs.
5. Establishing a Brand
As soon as you have come up with the best product or service to sell to your market, the next step is to establish a brand. This requires a lot of marketing prowess. However, the key technique is to build around a unique, relatable and engaging brand that your customers can embrace, live and breathe.
6. Faith and Resilience
Ultimately, with the volatile nature of business and enterprise, the one key thing to keep you afloat and remain successful is that belief in your product and business. Having that strong faith in your product and building a culture of resilience can take you further.
This checklist should be easy enough for beginners who are eyeing out to stand up a franchise. Understanding how to start a successful franchise is ultimately the most effective technique. Without the core understanding, there’s no other proven way to start and be successful in the franchising field.