A popular adage says that even a small business owner is an Entrepreneur. It’s not really the size of the business but rather the passion towards it. And with investments (time and money) in such ventures, more and more people are joining the bandwagon. The last Census data showed us over 1100 new franchise businesses were launched every day! But before you put your hand up for any Franchise Opportunity, here are some factors to keep in mind:
1. Sources of Income:
While some franchises (not all) offer limited source of income and work on exclusivity, there are others that provide varied sources of income like royalties from advertising revenue, royalties from product sales etc. For e.g., Dunkin Donuts or Krispy Kreme donuts is a source of income in itself and so are the sandwich shops like Subway. Then there are businesses that offer more than one stream of revenue. The important thing is to know where your interests lie before you invest capital in them.
2. Resistance to Failure:
Ask yourself if you can handle possible failure? Franchise business investments are huge, especially for newbies who haven’t done their research well enough. And no matter how much time or money you put into it, if it doesn’t work out, you end up losing both! So be sure to ask yourself what would happen if the business fails?
3. Risk Tolerance Capacity:
Investment means risk! There aren’t too many sure shot success stories around when it comes to entrepreneurship. And while the ones that do succeed are role models, they still can’t be imitated. So you need to ask yourself if you have what it takes to deal with possible failure. It’s not only about losing money but also your time, effort and self-esteem.
4. Direct vs Indirect Involvement:
Of course this is completely dependent on your skillset and interests! But some businesses like hotels/resorts or retail actives require direct involvement whereas others require just enough training or moderate involvement for say marketing or sales related activities. For example, cafes / restaurants, convenience stores etc. fall in the later category since there are already people who do these jobs better than you would!
5. Initial Investment:
Franchise investments are a big ticket affair. And while the opportunity cost of investing in a job is huge, with a franchise you at least have some kind of control over your destiny. But with such investments come high initial investment costs and most successful businesses are built on the foundation of profits from their earlier stores.
6. Relocating:
There are several franchises that do not allow their business owners to relocate after the contract has been finalized between them and the parent company. So before you finalize any agreement, be sure to ask if there’s any clause against moving your store elsewhere or relocating itself? All agreements should be thoroughly checked before signing it so as to avoid any unpleasant surprises later on!
7. Regulations:
The regulations around franchising differ from country to country. So it is important to know the laws and rules in your state. For e.g., In India, there are at least three different types of franchises available, namely Single Brand Franchises (like Café Coffee Day), Master Franchisees (like Pizza Hut) and Area Developers (like McDonald’s). The first two need prior approval from the parent company while the latter type does not require any such approvals!
8. Reliable Suppliers:
While some franchise agreements may be specific about the supplier that should be used by all their business owners, other than that you can choose your own suppliers as per your needs and convenience. You may also have certain responsibilities when it comes to product range so it is imperative to be able to source your suppliers and products as per the parent company’s rules.
9. Returns:
This is an extremely important question especially for those who invest in real estate and land. Since there is no tangible product involved here, you need to ask yourself how guaranteed these returns are? Sometimes they may not be at all! So do check with your parent company or consultant before investing so as to avoid any surprises later on!
10. Catchy Name:
The name of your franchise should not only be catchy but also brief enough so that it can easily fit onto a business card. And lastly, do remember the motto – PATIENCE IS A VIRTUE WHEN IT COMES TO SUCCESSFUL FRANCHISING!
