3 Critical Franchise Benefits

Investing in a franchise business may make sense for you, particularly if it’s your initial move into business ownership. By selecting the right franchise, you can reduce some of the common challenges associated with small business startups. Leveraging the franchisor’s proven model and systems, you should ideally be able to mitigate many of the risks associated with opening a new business. From initial site selection through ongoing day-to-day operational best practices, a strong franchise will provide significant benefits to help you achieve success. There are three critical benefits, however, that I believe you should consider when evaluating and selecting a franchise that’s right for you: the brand, the leverage, and the systems.

The Brand:

What is the value of the franchise brand in your target geographic market? Perhaps the brand has a great presence in the Northeast, but that may have little to no value for you if you are considering opening the first unit in the Southwest. A big part of what you are paying for is the brand recognition that the franchisor has ideally already invested in and developed.

A strong, positive and established brand is one of the biggest advantages of franchising. It would be extremely difficult to build a brand by yourself to the level that a successful franchise can achieve. A great brand should have positive value in the eyes of the customers or clients you’re trying to attract. Important considerations on this point include:

What is the value of the brand in your market?

Does it have a positive reputation, or have there been issues in the past that have tarnished it?

Is it a tired and dated brand, or is it fresh and relevant?

If the franchise you are considering is just getting started, or has limited to no presence in your area, then you should evaluate their ability to execute. What are their plans for building a brand that will benefit your location over time?

As other franchise locations open in the same area, is there a budget and plan for marketing the brand image specifically?

What is your monthly cost to participate in developing and maintaining the brand (this is typically the marketing component of the monthly dues to the franchisor)?

Franchise Leverage:

A successful franchise system should provide opportunities to leverage economies of scale that would simply not be possible or available to an independent small business. These points of leverage may include everything from preferential access to lending, to the combined buying power of the entire system.

When I owned several units of a local pizza franchise in the 1990′s, for example, I was able to buy cheese and other ingredients at a much lower price through the franchisor than I would have been able to negotiate as an independent operator. Advertisement is another area where franchise leverage can provide an advantage. You may be able to budget for an effective radio or television campaign as a franchise group, for example, that you would not be able to afford as a stand-alone business. The opportunities for leverage offered by a franchise may include:

Preferred access to lending (banks may prefer to lend to established franchises with whom they have experience).

Lower operating costs through group purchasing (for raw materials, equipment, and other operating supplies).

Cooperative and leveraged advertising campaigns.

Lead generation through websites or call centers.

More favorable consideration by landlords who value the reputation and historical success of the franchise.

Network of fellow franchisees to provide advice and moral support.

The Systems:

The quality of the systems offered by the franchisor should be the most important consideration in your selection of a franchise. The systems include everything that is used to operate the business in a standard and repeatable fashion. It includes the initial startup and training, the operations manuals, and the ongoing best-practices that drive continuous improvement in the business model. A comprehensive and proven system is what enables a self-managed company, as opposed to an operation that is dependent on a few key people who have all of the knowledge in their heads.

The systems are the core of any successful franchise. Without effective, proven and repeatable systems there is no franchise. The benefits of a great franchise system typically include:

A proven and repeatable business model.

Shorter time to opening your business (including assistance with site selection and design).

Comprehensive initial training (including operations and marketing).

Little to no direct experience required (the franchisor teaches you how to bake the cookies).

Ongoing support & innovation (including improvements to the systems).

There are certainly other important benefits and criteria to consider when evaluating a franchise, including their history and track record, their management and support team, protected territories, and how the business concept fits with your lifestyle and vision.

As with any business opportunity, there is no guarantee of success and there are trade-offs. When you own a franchise you must adhere to their policies and structure, and you are committed to the franchise for the length of the franchise agreement – often 10 years or more. This can create a conflict with your desire to be your own boss, and to have complete control over how you run your business. You are also exposed and affected to some extent by how other fellow franchise owners operate their units and their potential impact on the brand’s reputation.

There are no definitive or reputable data on the success rate for franchises, despite the often cited and debunked statistics to the contrary. That’s due, in large part, to the fact that franchises vary widely across many industries. There are thousands of franchise models available today. You must carefully consider the value you may be able to derive from a franchise, versus building your own independent business. With the correct expectations and planning, a franchise that meets your needs may well be the best option for you. A franchise that offers a strong brand, an opportunity for collective leverage, and comprehensive and proven systems can help you realize your dreams of successful business ownership.

How To Select The Right Franchise For You

If you’re looking for a franchise to purchase and start your business from, you’ve probably looked at sites such as Franchise Gator or Franchise Direct. You’ve probably seen different businesses and different price ranges and are trying to find the right business for you. Although there are many criteria that go into deciding what business is right for you, this article will introduce some considerations that you should have in mind when selecting a business.

#1: Remember That In Terms of Results, You Usually Get What You Pay For

Every business is different, so this consideration may or may not apply. Businesses vary in their price range from three to six figures. But you should always be wary of the businesses that cost less than 1000 dollars. These are usually businesses in which you will make little to zero amount of dollars or where you will have to work especially hard to attract the right customer in order to turn a profit. Examples of these kind of businesses include online stores and turnkey opportunities. One can make money from these businesses but it requires attracting the right kind of people and it usually backfires.

The best business opportunities are the ones that cost at least 10,000 as they are usually more structured and have a solid unique selling proposition. These two things will prove to be very important, especially to someone who is new to running their own business and does not have experience in marketing. The more expensive franchises are usually the ones that are already established brands and do not require as much of an effort in marketing.

#2: You Must Ask Detailed Questions To The Representative

Once you’ve submitted an inquiry to a certain franchise, their representative will contact you and ask some questions. It is very important that you ask a lot of questions and ask detailed questions about the franchise you are inquiring about. This is a process that should take at least a few weeks as you need that time to process all the information and make an informed decision. Some topics on which you should ask questions involve:

1) the amount and type of work you will have to do,
2) what is the franchise’s unique selling proposition,
3) ask to see any financial spreadsheets or information about the company’s performance, and
4) what kind of time commitment will you have to the ownership itself. You must make sure to gather a lot of information before you make the big decision to purchase a franchise.

Buying Franchise X, Y, or Z – Which Is the Right Decision?

When you finally decide that being a franchisee is right for you, you still have a major decision to make – which franchise in particular do you buy?

Franchise opportunities abound, and many of them are good investments, but you have an entrepreneurial mind that insists on asking – which one is the best investment?

The answer to this query will depend in part upon the individual, for “matching” your personal background, passions, managerial expertise, and financial situation to the requirements, concept, and “culture” of a particular franchise is a big part of the equation.

There are still, however, more general factors to look for when deciding on which franchise opportunities make the most sense as a business decision. Below, we look at five of the most important factors:

1. A Sold, Well Known Name

What a credit rating is to a loan application and a personal reputation of integrity is to a multitude of life endeavors, a well known and highly respected brand name is to a business. When you buy the right to use a “big name” of an established company, you gain far more than the letters that spell it or the sound of its spoken syllables-you gain the reputation of the company itself, credited to you as if it were your own. The challenge will be to live up to that reputation. The main benefit will be instant access to a large, loyal customer base.

2. Assistance in Getting a Prime Location

Many franchises can probably survive in most locations, but to truly thrive and reach their full potential, it may need to be in a more specific type of area. Some business types do better downtown, while others fair better in the suburbs.