How To Build A Successful Franchise
Opening a franchise can be one of the biggest decisions you make in your life. So understanding what’s involved before you buy a franchise, or franchise your own business, can give you the best chance of success. It’s important that you do your research and plan thoroughly because running a franchise is a long-term commitment.
To help you get started on your franchising journey, we’ll look at how you can build a successful franchise.
Before you buy or start a franchise
Before buying or starting a franchise, there are many things you need to consider, such as what happens if the franchise or franchisor fails. Therefore educating yourself is vital. Free franchise education is available to help you assess franchise business opportunities, or you can take the Franchise and Small Business Survival eClass series, which teaches you about franchise contracts, expectations, debt and partnerships. You can also read about franchising and your tax obligations.
Here are some tips:
- Find out if your personality, skills and abilities are appropriate for the franchise
- Research the history of the franchise and other franchisors
- Speak with an accountant to check if profit figures are realistic
- Talk to a lawyer before you sign the Franchise Agreement.
Buying a franchise vs. franchising your own business
When you buy a franchise, you can run an established business and sell its products and/or services for a specific period of time. To increase your chances of success, use the starting your business checklist. Once you enter into a Franchise Agreement, you’ll need to run the business according to the requirements set out in the agreement and the franchise operating manuals. You’ll also have to make sure you comply with the Franchising Code of Conduct.
When you franchise your own business, you can open your product and/or service to new markets and extend your brand’s reach. First, you must operate your own franchise model before selling one to somebody else, as this can help with proving your concept, establishing demand and creating good processes and systems that you can repeat in each new franchise. Be sure to choose a franchisee who’s a good fit for your franchise business and have a good working relationship with them.
After you’ve bought or started a franchise
Getting off to a good start
If you’ve bought a franchise, pay close attention to any documents you’re given (e.g. operating manual) and to the training you receive on how to set up shop, hire staff, buy or lease equipment, stock up on inventory, and so on. Keep in close contact with your franchisor to ensure that you’re on track. Also, don’t forget to plan your grand opening event to let everyone know about your business.
Following the rules and making your own plan
Follow the business plan provided by your franchisor, but also write up your own business plan. It should incorporate all the commitments you made in the Franchise Agreement, as well as include your own goals and objectives, and the strategies you’ll undertake to achieve them. Make sure to revisit and update your plan regularly. Also ensure that you have enough money to pay for expected and unexpected costs.
Marketing your business
Your franchisor can do regional or national advertising, including TV and billboard advertisements for building name recognition or publicising franchise-wide deals and offers. You can deal with targeted, local marketing, such as doing giveaways, running contests, sponsoring local events, and building relationships with local media outlets. You can even use tactics like direct-mail ads, discount coupons, fax blasts and free samples. You should also have effective brand management, whether it’s branded merchandise, marketing print or design, to keep your brand in check. Strategic Flow Management can assist you with all your brand management needs.
Your success relies heavily on the relationships you develop with your customers, employees and franchisor. For your customers, talk to them every day and find out what they want and what will make them happy. For your employees, treat them fairly, get to know them on a personal level, communicate clearly to them, and have reasonable expectations around their performance. As for your franchisor, maintaining a good relationship with them will help you avoid problems and disputes, and it may also open up additional franchising opportunities.
The top franchises in the world and what makes them successful
The top franchises in the world, according to Entrepreneur, have a large system/international size, a high growth rate, and financial strength and stability. Some of the top franchises include H&R Block, McDonald’s, KFC, Subway and Anytime Fitness.
Here, we’ll take a closer look into what makes a franchise successful:
- The right business model – This is the way the franchise enhances customer value compared to its competitors. For example, McDonald’s delivers quick, convenient and cheap meals to its customers compared to traditional restaurants.
- The right scale – The savings in cost linked to a larger production scale of a standardised menu (the bigger the production scale, the lower the cost per menu). McDonald’s has 33,510 stores around the world, so it has a scale advantage over other franchises with fewer stores, such as KFC with 17,401 stores.
- The right scope – The savings in cost related to the offering of different products by one corporation instead of many corporations. For instance, McDonald’s offers a variety of products for sale, such as adding McCafé in many locations, so it has a higher return on assets.
- The right location – The benefits linked to occupying primary location sites for franchise stores. For example, McDonald’s is an older franchise so it had the opportunity to choose the best locations, which is also why it has a high return on assets and a high operating margin.
- Optimum market saturation – This refers to the degree of market penetration. A company with a lower degree of penetration will have more room to grow by opening new stores. Being an older franchise, McDonald’s doesn’t have more room to grow but it has penetrated the market to a large degree.
Now that you know what it takes to build a successful franchise, it’s time to take the next step of your journey to success. Good luck!