Decided this is the year you want to be your own boss and buy a franchise? Get on the right track with this top line advice.
So you want to be your own boss? You have your finances in order and you’ve got business experience. You may have previous management skills, or you’re just confident you can lead a business and possibly a team of people and create your very own empire. Now it is time to make the decision – how do you know what franchise suits you?
Deciding on buying a franchise can be a difficult decision to make. There are as many different franchises available in the Australian market just as there are loaves in a bakery. So it’s important to choose a franchise that suits you and your passion.
With that in mind here are six helpful steps on how to buy your own franchise in 2012.
1. Determine your franchising objective
It’s important to distinguish what it is you are looking to achieve by owning and operating your own franchise. Is it because you are passionate about something and want to live and breathe this passion every day? Or maybe purchasing a franchise is a pure investment objective to increase your earning potential.
Understanding what you want will enable you to start your search process off on the right foot. Passionate people should search firstly by interest to find the opportunity to meet that passion and then consider the budget secondarily.
Choose a product or service in an industry that means something to you. There is no point in selling tents if you hate camping. A passion for your work has a direct correlation to your natural ability to be really good at it, which will give you higher chances of success.
Alternatively, if you are more interested in becoming an investor i.e. not wanting to be directly involved in the day to day running – you should first filter your search for franchises that clearly state they suit investor contribution.
2. Investigate demographics and consumer demand
Many larger franchise businesses research and plot the location of their franchises to ensure that the demographic and traffic is a good match for their business. However, many smaller franchise businesses, especially mobile businesses (coffee or food carts) and home-based businesses (financial planning or decoration services), will require you to do your own homework.
To do this, you will need to investigate the areas in which you hope to operate. Make sure the location is a good fit for you and the particular franchise you are looking at. Research existing competition and only consider opening the franchise if there is a unique selling proposition i.e. something about the business that will make it stand out from the rest.
3. Look for a Unique Selling Proposition
What is it that makes the product or service stand out from its competitors? It may be your positioning, the type of products or services you offer or the unique way you serve your customers. Don’t be fooled; standing out from the crowd doesn’t necessarily mean you need to buy into fads or trends – especially those that won’t be around in the next five years.
You should investigate what makes the product or service unique and whether this factor is sustainable. For example, a big brand like Gloria Jean’s or Domino’s Pizza both offer commodity like products in a very competitive food and beverage retailing industry – yet they offer unique brand positioning and marketing strategies ensure that demand for their product is consistent.
A USP ensures that you will be able to attract customers and, by following through on this unique offer every time, you will also retain them and create an ongoing relationship.
4. Consider franchisee turnover
Do your own independent research by approaching owners of a franchise you’re interested in and ask if they mind answering a few informal questions. This is a great way to get an insight into the relationships between the franchisee and franchisor.
A franchisee’s length of time in the business can tell you a lot about whether you should invest your time and money. If franchisees last a long time, say five years or more, this indicates they enjoy the work and money they make from the franchise. Two common reasons for high franchisee turnover are lower than expected profits, or a lack of fulfilment and enjoyment in operating the franchise.
5. Aim to align your values
More and more businesses are becoming mindful of the need to be environmentally and socially sustainable. Values in a business are not only limited to internal stakeholders – like managers and staff, but also the external stakeholders within the community. It is important to research the values of the business and be sure they align with your personal ones. This can include giving to charity, sponsoring community projects or sports teams, refusing products that test on animals or supporting fair trade.
Another value to consider in a franchise business is the transparency of their processes. If you are paying a marketing royalty as a percentage of revenue earned in the franchise business – are you easily able to see how and where this investment is being used to benefit your franchise? Not all franchisors offer this level of transparency, so it’s important to ensure you are aware of how things operate as you’ll be less likely to be caught off-guard later on and disappointed.
6. Find expert advice
Finding the right expert, the right legal team or franchise advisor can be a frustrating process – especially if you’ve never had to find one before or if you don’t know where to start looking.
- Online business directories like FranchiseBusiness.com.au are one of the best tools for researching not only franchise opportunities but a range of services required for the purchase of a franchise business. Consultation, finance and insurance advice is easily accessible via this industry hub.
- Associations, such as the Franchise Council of Australia (FCA), are another great place to look for expert advice. Here you may be able to access the history of your interested franchise including any potential risks for that particular business. More often than not these associations will be able to guide you to industry experts as well.
- Franchising expos are held regularly throughout the year and offer a great opportunity to network with fellow franchisers and scope out the competition. If you’ve spent a great deal of time searching on the internet for different franchise opportunities, an expo is another way to solidify any findings and talk face to face with franchisors or service providers for the franchise industry.
Choosing and building a franchise by yourself is a huge decision process and is not easily done. However with the right resources and advisors on hand to answer your questions and help you make the tough decisions, you’ll be more likely achieve your dream of a successful franchise business in 2012.
-Raffael Fernandes is account manager, FranchiseBusiness.com.au