The idea of running a franchise has been known to have a lot more appeal than starting from scratch. Knowing that you have a business system that already works, with advertising and marketing included, can save you years and ensure that you are set up for success from day one.
While the system is there to provide you with a solid foundation to build your business successfully, it’s important to know that if you want to open a franchise business, it is still imperative that you do your research and make informed decisions when choosing the right franchise and growing it into a successful business in the long run.
Here’s what you need to consider before buying a franchise.
What is a Franchise?
A franchise is a business model that lets a franchisee sell services or products while using a franchisor’s business name. In other words, you purchase the right to sell products and services on behalf of an existing business.
Additionally, the franchisee usually has access to the franchisor’s proprietary business knowledge, processes, resources, and trademarks once they pay the franchisor an initial fee, licensing fees, and ongoing royalties.
Why Is Franchising Popular?
One of the key reasons many people choose to buy a franchise is because of the higher probability of success in the first couple of years of launching. According to the Business Startup Statistics, 20% of Australian businesses fail in the first year and 60% will go bust in three years. This is why people that start a business from scratch can feel the pressure more so in those first formidable years of business ownership.
When starting from scratch, you’ll have to implement, test and refine all processes on your own, hire employees, create a marketing plan, devise an advertising strategy, and build brand recognition from scratch. With most franchises, many of these aspects are taken care of by the parent company. While this isn’t a ticket to an easy ride as you will still be required to work hard, franchising allows you to implement already proven strategies so you can avoid the trial and error period that new businesses go through.
Having an existing franchise team to support you with set-up advice, franchise details, marketing strategy, and advertising materials can help streamline operations and allow you to focus on other areas of your business.
6 Things to Know When Opening a Franchise as an Entrepreneur
Here are six different factors that you should be aware of when choosing the right franchise opportunity for yourself.
1. Choose the Right Franchise Industry
One of the most common questions people ask when considering a franchise business is “Which business type is best for franchising?”.
Since the process of setting up a new business can be a lot of work, regardless of whether it is a franchise or not, you first need to do plenty of research before investing in starting a franchise.
The first decision you’ll need to make is which franchise industry segment and franchisor is right for you. There are many industries to consider however, most franchise opportunities fall into the following industry segments:
- Health and fitness
- Retail
- Fast food
- Hotels and hospitality
- Home Healthcare
To help you decide what is right for you, it’s important to look at your personal values, skills and experiences that could align with a particular industry. You can think about your past work or volunteer experiences, any previous schooling, passions, and any other values that are important to you. Having a strong understanding of yourself can help you guide your decision on which type of business or franchise will be right for you.
Once equipped with this knowledge, we recommend searching within a franchise directory to discover what franchise opportunities currently exist.
2. Do Your Market Research
Aside from sourcing the capital required to invest in a franchise business model, you will also be responsible for actioning all pre-sale due diligence such as paying the franchise fees and completing a franchise disclosure document before purchase. This is why it is so important to be confident that you’ll make a profit in the franchising business you ultimately choose.
Conducting market research on the profitability of your franchise choice will not only help you determine profitability but can also help with creating your business plan that can also be used in the application process and when asking for loans.
Some factors to consider in your market research include:
Location
Find the right local community to open your business in or to operate from. You’ll want to determine if the area is a growing market with many potential customers who would be interested purchasing in your products or services to ensure your business will prosper.
Demographics & Psychographics
Beyond location, understanding the demographics and psychographics of your potential customers (also known as your target market) will be imperative to help you know whether there will be people interested in the type of product or service you’ll be offering.
Ask yourself:
- “Who is our ideal customer?”
- “What are their pain points?”
- “What are their wants?”
- What current trends are affecting my target audience?”
Competitive Advantage
To stay ahead of your competitors, you’ll need to know how to differentiate yourself to stand out and drive customers to your business over other like-minded businesses. Look at your competitors and determine your Unique Selling Points in comparison to them this Point of Difference will give you a competitive edge.
PESTEL
Conducting a PESTEL analysis is a great way to conduct more in-depth market research to better understand how the overall landscape can affect your business’ sales and overall success in both the short term and the long term.
PESTEL stands for the following factors:
- Political
- Economic
- Social
- Technological
- Environmental
- Legal
Once you have a good understanding of how these factors can affect your business you will be able to determine your Strengths, Weaknesses, Opportunities & Threats. You’ll be able to better comprehend your business’ profitability. This analysis can also help you better build out your business plan for both your franchise application and potential lenders for funding.
3. Assess the Benefits of Opening a Franchise
It is important to assess the benefits of opening a franchise. Buying and running a successful franchise can have many benefits to a business owner but, there are three main advantages:
Running a Business With Purpose
When you open a franchise because you are passionate about that industry and love the business you’re building, you’re more likely to experience exponential growth and success.
Nurse Next Door Home Care Services Franchise Partners are deeply committed to helping the elderly and people living with disabilities stay as independent as possible while they age in the comfort of their own homes. Having that sense of purpose is one of the most rewarding aspects of owning a franchise business.
Nurse Next Door franchise partner Kiran Samran believes that any business owner must stay connected with their purpose, “Nurse Next Door has provided me with the ability to live my dream of serving with a purpose while also having a work-life balance. We are making lives better every day, from taking care of our Bold Pink Team to providing high-quality care to our clients.”
Opportunity for profit
Committing to a franchise model often requires less working capital and less risk than starting a business from scratch. Working with an experienced franchisor is like having an entire marketing, development, and sales support team at your fingertips for a fraction of the cost of hiring your team. Good franchisors are happy to share their business model along with the knowledge and expertise you need to make your business money.
While many franchises have profit potential, some franchises are more profitable than others. The home care industry, for example, is growing rapidly in Australia with over 19% of the population either over the age of 65 or living with a disability and 7 out of 10 would prefer to live in their own home as they age.
While there are many business franchises out there, it’s becoming clear that for many, starting a home care business is a winning strategy for people who want to open a franchise.
Built-in network
When you join a franchise business, you will have access to a network of business coaches and other fellow franchise partners.
This is a great opportunity for you to leverage these contacts who can help you overcome challenges you may face, celebrate your wins, and make you feel supported overall as you will be surrounded by peers that have the same interests, experiences and aspirations as you.
4. Accept the Challenges of Owning a Franchise
While there are many benefits to owning a franchise, we also acknowledge that there are some challenges that may arise. Many of the challenges do not hinder the success of the business but, it is something many franchise partners accept as part of the business.
You must check in with yourself to make sure none of these challenges is a dealbreaker for you.
Reduced Brand Control
The franchisor owns the branding of the business and will have a set of brand guidelines that will need to be followed so that each franchise partner operates cohesively.
For anyone who likes to be creative, this could feel restrictive however for many it’s a huge sigh of relief as building a strong and credible brand can take a lot of time if you were to start from scratch.
Extended Approval Process
You may be itching to get started right away to start turning a profit; however, when opening a franchise, you will first have to go through the application process, which can take time.
While some entrepreneurs feel this takes away from the momentum and excitement of starting a new business, many are happy to wait because it helps them build more confidence in the business model and brand.
Higher Overhead Costs
Since there are franchise fees, initial investment costs, marketing fees, and recurring royalties, the overhead costs will be higher, however, when you weigh the costs versus benefits, this may not be a problem to some as the benefits that a franchise parent company can offer will be worth the costs, especially in high growth industries such as home health care.
If any of these challenges are a concern to you, we recommend speaking with your potential franchisor to gain greater insight into how they mitigate franchisee concerns.
5. How to be a Successful Franchise Partner
While a franchise model can offer a proven system while still allowing people to be their own boss, the success of a franchise isn’t guaranteed. Franchise Partners need to be aware that they still need to work hard if they want to have a successful business, while a franchisor can give you all the tools to succeed you still need to use them.
Here are some extra things you should take into account if you want to have a successful franchise:
Have Leadership Skills
Having strong leadership skills can make you a more influential and respected business owner. You’ll most likely hire and train employees, and with that, you’ll need to know how to lead your team to success through strategic leadership.
Have Enough Capital
There is a cost to franchising, and as a franchise partner, you need to have money and a budget to cover expenses like real estate costs, franchise fees, marketing and opening inventory (if you are selling products) for at least the first six months of your franchise business, and ideally longer.
Provide a WOW Customer Experience
Franchises need to maintain a stellar and credible reputation. Franchise Partners need to invest their time in providing high-quality experiences for both their new and existing customers, turning them into raving fans. Ask for referrals, and testimonials and follow up with customers to ensure they are satisfied with your services.
6. Understand the Costs of Running a Franchise
The overall cost of running a franchise can vary greatly depending on the type of business and industry.
For example, Franchise fees can range from $10,000 for a home enterprise to $5 million for a large hotel operation. It all depends on the type of franchise they are purchasing.
It is worthwhile to ask if the franchisor you are interested in partnering with has reduced entry fees. For example, Nurse Next Door Home Care Services likes to work with frontline workers such as Registered Nurses and offers them a discount for purchasing our home health care franchise.
After the franchise has launched, there will be ongoing royalty fees and inventory costs to be aware of. When you are going through the discovery process, ask to see a list of all the fees you may encounter as a franchise owner.
Key Takeaways
There are three important things to remember:
- Take the time to research the types of franchises
- Understand what makes a successful franchise owner
- Check in with your motivations for owning a franchise
In the end, you want to choose the right franchise business for you!
And while we can’t speak to all franchise businesses, we can when it comes to home health care, when you work with Nurse Next Door Home Care Services, you get access to all of the expert company resources and a world-class proven system you need to set you up for business success.
Our most successful Franchise Partners strongly believe in our philosophy of Happier Ageing and Possibility. They go the extra mile to ensure high-quality medical and non-medical home care services will help clients stay at home for longer.
