How to start a franchise location enterprise?
Think of your favorite fast-food restaurant. How many different locations can you recall? Maybe you’ve noticed at least 50 different locations.
Perhaps there are even a larger number nationwide. Before you know it, there are locations of that same restaurant worldwide. How can that be? Maybe it’s because it’s a franchise.
The good news about franchise location ownership is that it’s easier and less risky than starting a small business. You’ll be working with an established brand, and you’ll have an existing customer base.
But before you begin your new venture, read on to learn more about what a franchise is and how you’ll benefit from owning one.
What is a Franchise?
A franchise is a team enterprise between the original business (franchisor) and the buyer (franchisee). Upon purchase, the franchisee owns the right to sell goods and services under the company’s brand name and logo.
Who Buys a Franchise And in What Industries?
If you’re looking to start your own business, a franchise is the perfect way to start. You have the flexibility to set your hours, and it’s an excellent way to make money. As a franchisee, you’ll have an edge over most small businesses in your area.
Anyone can buy a franchise. All it takes is a little money and an entrepreneurial mindset.
The most common franchises occur in highly competitive industries such as restaurants, hotels, and the beverage industry. You’ll find that the most common franchises happen in the fast-food industry.
We’ve outlined several advantages of owning a franchise.
Higher profits and earning potential
Investing in a franchise increases your chances of making a higher profit. Owning one offers you better financial flexibility than a small business.
You’ll sell a brand that others can recognize well. You’ll see a greater return on investment, which makes the startup costs worthwhile. You’ll have more financing opportunities because of the brand you sell.
Lenders will feel more confident offering you startup loans if you invest in a time-honored business. Some examples include national fast-food chains like McDonald’s or Taco Bell.
Increased purchasing power
As a franchise owner, you’ll form strong partnerships with outside vendors. These are the very people you order products and supplies from.
Having those contracts helps you stay in business because you can order the goods and services you need to operate. Plus, you may qualify for good deals because you are a return customer.
Excellent marketing knowledge and opportunities
As a new franchise owner, you’ll learn a lot about marketing from your franchisor. You’ll learn tips on customer service and product quality.
These values will help you take your business to the next level, where you have the opportunity to expand and grow.
Low risk
As a franchise owner, you’ll enjoy a greater level of security. You’ll have a set business model to work with, along with a popular brand.
It’s a far cry from building your own business from scratch because you’ll spend less time convincing others to buy your products.
You’ll make a profit right from the start without spending a lot of time and effort. Because of a greater return on investment, it’s an excellent way to a brighter future.
Ongoing support from the franchisor
Ongoing support is a valuable asset for new and existing franchise owners. Initial support includes looking for a franchise location, designing and building your store, and ordering supplies.
Further assistance includes training for you and your employees. You may also benefit from learning new marketing techniques as you build your franchise over time.
How to Save Money When Opening a Franchise Location
Now that you know the benefits of investing in a franchise, it’s time to look into ways of saving money when opening one.
Keep in mind that you’ll earn more money when you save money. You can build a solid savings to fall back on while building and operating your franchise.
Here are some ways you can save money while building and operating your franchise business.
Do some budgeting
One step in operating a franchise is to work within a budget. Figure out what you should spend on and how much.
Decide on what you need and get ready to reduce excess spending. Negotiate prices with your vendors or shop around and compare.
Eliminate any memberships or subscriptions you don’t need that aren’t serving your business. Also, look for an advertiser who produces results at a reasonable cost. You may decide to opt for internet or radio ads.
Hire a franchise architect
There are several perks to hiring a franchise architect. For starters, they will do everything in their power to help you minimize costs and maximize your profits.
A good franchise architect will help you choose a location that’s ideal for business. The architect will act as a liaison by dealing with local building departments so you don’t have to. They will secure all of the permits you need to run your business.
Negotiate a good rent price
Business rent is very expensive, and lease terms can be tricky. But these things can be worked out most of the time.
By negotiating lease terms, you can barter for lesser rent. One way to do this is by opting for a longer lease. Your landlord may offer you reduced rent for the first few months of your term.
Another way is to have an agreement where you pay a portion of your revenue towards your rent. This is known as a percentage rent agreement.
Other Financial Aspects of Operating a Franchise
Buying a franchise location can be exciting and rewarding, but it takes some thought and discipline. It’s important to think of ways to reduce costs and maximize profit.
But what’s equally important is that you don’t sacrifice quality.
There are several common mistakes you should avoid when operating your franchise.
Don’t sacrifice quality
The first thing on the agenda is quality. Cutting corners to reduce spending impacts the products and level of service you offer.
Selling a quality product is vital to continued customer satisfaction and business reputation. If you want to save money without sacrificing quality, consider taking other measures.
Find ways to reduce operating costs and improve efficiency by streamlining your franchise.
Don’t look for short-term fixes
Short-term cost cutting can seem like an easy fix, but it’s not. It can harm the long-term growth of your business. Cost cutting can hurt your business in three ways:
- Decreased vendor quality
- Strained vendor relationships
- Poor customer experience and low employee morale
You may be able to get better deals on products from some vendors. But keep in mind that price cuts impact product quality. Your vendor may let you offer a lower price, but they may need to cut corners and sell you a poor-quality product.
Good service means having good products to sell. When quality goes down, so does customer satisfaction. Your franchise business can suffer from a loss of reputation.
Low quality trickles down to your employees and impacts their morale. Pay cuts may mean short-term savings, but they hurt turnover. You could end up losing more workers in the long run.
The key to a successful franchise is investment. It takes money to earn money.
