Franchising is a more secure way of starting a business than opening a new chain, as it offers quick new customers and a whole organization taking care of the finer details. A lot of franchises succeed but many fail as well. Sometimes there is a mismatch between franchisor and franchisee and sometimes the latter is not doing what he/she should. However, all these problems can be avoided by following these simple rules and pieces of advice:
Research
The most common mistakes are business-franchisee mismatch, unprofessional or unreliable franchisor, or going ahead without much information. Sometimes potential entrepreneurs choose these ventures just because they are profitable or secure and promise a good return on investment (ROI) without looking further into the business specifications. For example, a diligent and tidy person will have trouble running a night bar even if it is a viable franchise.
The easiest and most reliable way to evaluate a franchisor is to contact current franchisees and ask for feedback about their experience. For further information, check internet forums and discussions.
Finally, some opt for franchises without considering ALL aspects – from materials to employees and customer service. Again, asking around and reading can help inform.
Analysis and Choice of Location
Competition brings down profit margins, so franchisees should evaluate the region before selecting what they want to do and where they will do it. Alternatively, if they already have a premise, they should analyze the businesses close-by. Proximity of suppliers will bring down the cost of materials and may offset a higher rent. Most franchises offer this service as part of their plan so entrepreneurs should take advantage of it – greater visibility usually means more customers.
Investment in Physical and Human Capital
Many entrepreneurs are frightened to invest a lot initially, but their business might suffer because of this. Purchasing more assets means more clients can be serviced thus improving customer satisfaction – for example, extra checkouts mean shorter lines. Additionally, beginner franchisers should invest in employee training to provide higher quality service and increase their efficiency. Fringe benefits could help retain valuable employees and managers in the firm.
Financial Prudency
Franchisees ought to be careful with their money and should expand only when certain that the investment will quickly pay off. They should not spend lavishly during the initial stage and carefully consider whether a loan is the best alternative or other options exist as well.
In the beginning, it is easy to lose track of expenditure so hiring an accountant or consultant to audit the budget can save them anxiety and money. Also, the franchisee should always look for cheaper suppliers to lower his/her costs.
Genuine Interest
Franchisees should not hire managers to run the business for them, but adopt an active, hands-on approach to succeed. Personal involvement will equal improved services and more motivated employees – all of which are necessary for success. Not only will they keep a closer look on expenses and quickly curb undesired behavior, but franchisees will derive a greater feeling of satisfaction.
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