There are a lot of entrepreneurs who want to open a franchise this year; however, they don’t know how to go about it.
Well, the goodness is, that this blog post fully reviews how entrepreneurs who want to open a franchise can do that successfully without taking any risks. Relax; we’ve got you covered.
Most people have a business of their own that they would like to launch.
Starting from the beginning can be frustrating for business owners, though, as it requires a lot of work to build a clientele, increase awareness, understand the market, and create plans.
Furthermore, the organization may be riskier due to issues with the initial investment and a lack of backup assistance.
However, to mitigate this risk and let more people live out their aspirations of being their own bosses or business owners, the market today is starting to employ a novel strategy known as franchising.
For entrepreneurs who want to open a franchise, we’ve put together this guide to help you do it successfully and without taking any risks.
In this blog post, we’ll walk you through the process of opening a franchise this year, from choosing the right franchise to securing funding and getting your business up and running.
Table of Contents
Key Takeaways
- Significant preparation is needed before launching a franchise. The advantages and disadvantages of starting a franchise site must be carefully examined and weighed by prospective franchisees.
- Through franchising, business owners have the chance to launch a fully operational enterprise with established branding and operational procedures.
- Opening a franchise is not the same as launching a brand-new company. Franchises provide the advantages of brand awareness and parental corporate support, but there are also disadvantages such as high franchise fees and restricted control.
What is a Franchise?
A franchise is a business that is owned and operated by an individual or company (the franchisee) under the name and trademarks of another company (the franchisor).
The franchisor provides the franchisee with the training, support, and resources they need to operate the business successfully.
In return, the franchisee pays the franchisor an initial franchise fee and ongoing royalty payments.
Why Open a Franchise?
There are many reasons why entrepreneurs choose to open franchises. Some of the top benefits include:
Brand Recognition
Franchises come with built-in brand recognition, which can give you a head start over starting a business from scratch.
Proven Business Model
Franchises are based on proven business models that have been successful in other locations. This can reduce the risk of failure.
Support From the Franchisor
Franchisors typically provide franchisees with a variety of support services, such as training, marketing, and operational assistance.
Financing Options
Many franchisors offer financing options to help franchisees get their businesses started.
How to Choose the Right Franchise
When choosing a franchise, it’s important to consider the following factors:
Your Interests and Skills
Choose a franchise that you’re passionate about and that you have the skills and experience to run successfully.
The Investment Required
Franchises can vary widely in terms of the initial investment required. Be sure to research the costs of different franchises before you make a decision.
The Franchisor’s Reputation
It’s important to choose a franchise from a reputable franchisor with a good track record.
The Franchise Agreement
Be sure to read and understand the franchise agreement before you sign it. This agreement will outline your rights and responsibilities as a franchisee.
Once you’ve chosen a franchise, you’ll need to secure funding and get your business up and running.
Securing Funding For a Franchise
There are several ways to finance a franchise, including:
- Personal Savings: Many franchisees use their savings to finance their businesses.
- Small Business Loans: Banks and other financial institutions offer small business loans to franchisees.
- Franchisor Financing: Many franchisors offer financing options to their franchisees.
- Government Programs: Several government programs offer financial assistance to small businesses, including franchises.
Getting your Business Up and Running
Once you’ve secured funding, you’ll need to start getting your franchise business up and running. This will involve:
Finding a Location
The location of your franchise is important, so be sure to do your research and choose a location that is visible and accessible to your target customers.
Hiring Staff
Franchises typically require franchisees to hire staff. Be sure to hire qualified staff who are passionate about your business.
Marketing your Business
Franchises typically provide franchisees with marketing materials and support. However, it’s important to develop your marketing plan to reach your target customers.
Operating your Business
Once your franchise business is up and running, you’ll need to focus on operating the business successfully. This includes following the franchisor’s system and procedures, providing excellent customer service, and managing your finances effectively.
Also read this, Top 10 Most Profitable Business to Start With 10k in Nigeria | Tips
A Guide for Entrepreneurs Who Want to Open a Franchise This Year
Opening a franchise is a popular way to start a business, and for good reason. Franchises offer entrepreneurs the opportunity to tap into a proven business model and brand recognition, which can give them a significant head start over starting a business from scratch.
However, it’s important to do your research before you buy a franchise. Not all franchises are created equal, and some are better suited for certain entrepreneurs than others.
Before purchasing a franchise, entrepreneurs who want to open a franchise this year must follow these recommendations:
- Costs Associated With Starting A Franchise
- Franchisees Must Conduct Extensive Research
- Disclosure Statement for Franchises
- Entrepreneurs Who Wish To Open A Franchise Need To Ensure That Their Values Align
- Opt for a Strategy that Benefits both You and Your Company
- Your “Discovery Day” Meeting should be Scheduled
- A Chance to Make Money
- Construct a Business Plan
- Employ Personnel
- Engage the Franchise Manager and other Franchises in Conversations
1. Costs Associated With Starting A Franchise
As expected, the franchisor charges a fee for the assistance and knowledge it provides to franchisees.
There is a one-time “franchise fee” that all business owners who want to launch a franchise must pay.
The usual price range for this service is between ₦20,000 and ₦50,000.
Franchises will now be required to pay a royalty fee for every transaction.
Typically, these fees comprise 4%–12% of monthly gross sales.
To effectively plan the opening of a franchise location, all of these short-term and long-term costs must be taken into account.
2. Franchisees Must Conduct Extensive Research
Calculating the franchise and royalty costs if you’re interested in joining a franchise is only one of the many things that entrepreneurs should consider while doing their research and preparation.
Before you make any judgments or investments, it’s important to learn as much as you can about the company.
Analyze the performance and sales information of not just the company but also of specific franchises in various locations.
Which performs better than the others? What kind of operating margins do they use?
These are pertinent questions to which answers should provided.
3. Disclosure Statement for Franchises
The Federal Trade Commission has put protections in place for business owners who want to launch a franchise, which is fortunate.
A Franchise Disclosure Document (FDD) is something that every franchisor is required to give prospective franchisees.
In the FDD, the franchisor details exactly what it will provide for franchisees as well as what it anticipates from them.
This document is divided into 23 sections that cover the general business history, details about any legal disputes, information about prior bankruptcies (if relevant), franchise fees, limits, financial statements, and more.
All of the market research, company strategies, and financial arrangements that the enquiring entrepreneur possesses should be considered in addition to the FDD while analyzing it.
4. Entrepreneurs Need To Ensure That Their Values Align
Make sure your ideals line up with those of the franchisor before choosing a franchise to open.
You can construct your own management philosophies and workplace environments, as well as regional marketing plans.
But in the end, you are marketing a company that has a well-established and fairly inflexible manner of doing business.
If you truly believe in the item you are selling, it will be of great assistance.
Will you have the ability to adhere to their guiding principles and corporate identity? If not, you might want to look at other companies.
5. Opt for a Strategy that Benefits both You and Your Company
The secret to long-term success is to find something you genuinely care about.
For instance, if you have experience working as a franchisee’s employee or manager, you are likely to have the necessary abilities and knowledge to open your store.
Although it would be helpful, experience is not necessary.
Many business owners who want to start a franchise pick a niche they are passionate about and put out significant effort to continue learning about it over time.
Entrepreneurs should, above all, create a franchise they are convinced will be successful in a particular area.
Due to low traffic or excessive competition, many franchise restaurants and retail stores will close their doors.
Your chances of becoming a successful franchise will rise if you conduct thorough market research, make thoughtful plans, and work hard to operate a seamless business.
6. Your “Discovery Day” Meeting should be Scheduled.
Before the COVID-19 epidemic, a franchise’s corporate office would often meet with a potential franchisee in person.
You get to know each other better during this meeting, referred to as the “discovery day,” and you get the opportunity to ask any questions you may have before deciding to purchase a franchise.
However, since the pandemic, virtual events have become increasingly prevalent on discovery days.
A virtual tour of the franchise should be included in the virtual meeting.
Depending on the franchise, the date of your discovery day will vary; some will hold the meetings at the very beginning of the hiring process, while others would rather have them at the conclusion.
Don’t be afraid to ask for a face-to-face discovery day meeting if pandemic constraints loosen up; it can help you determine whether the relationship is a good fit for you.
7. A Chance to Make Money
Franchising frequently involves less risk and working capital than starting a business from scratch.
When you work with an established franchisor, it’s like having a whole marketing, development, and sales support staff at your disposal for a fraction of the price of employing a team yourself.
Good franchisors are ready to impart their business model as well as the skills and knowledge you need to succeed in your venture.
Some franchises are more profitable than others, even though many brands have the potential to be profitable.
Although there are many different business franchises, it is becoming increasingly obvious that for many, starting a home care services business is a successful business franchise opening plan.
8. Construct a Business Plan
Even though many features of the company are already established, you are in command of its most crucial elements.
You can explain why you’d be a good steward of the company in your business plan.
In addition, it’s crucial to describe how you perceive the neighborhood you want to serve through your location.
It will be advantageous for the franchise as a whole and you are the expert.
9. Employ Personnel
You can start hiring once you have your contracts in place and a location.
Since the franchisor likely already has job descriptions and titles established, it will be simpler to post job opportunities and begin looking for qualified candidates.
If workers at other franchise sites are interested in moving, the franchise owners may also have a mechanism for posting open positions internally.
10. Engage the Franchise Manager and other Franchises in Conversations
Before purchasing a franchise, I advise you to speak with other franchises in the industry to find out about their actual problems and experiences.
It is also crucial to communicate with your franchise system representative to comprehend their guiding principles and aims.
Top Franchise Industries this Year
The top franchise industries this year are:
- Food and Beverage: Franchises in the food and beverage industry, such as restaurants and coffee shops, are always popular.
- Retail: Franchises in the retail industry, such as clothing stores and convenience stores, are also popular.
- Services: Franchises in the services industry, such as cleaning services and fitness studios, are also growing in popularity.
Benefits of Opening a Franchise This Year
There are many benefits to opening a franchise this year, including:
A Growing Economy
The global economy is expected to grow this year, which will create more opportunities for businesses.
Changing Consumer Trends
Changing consumer trends are creating new opportunities for franchises this year.
For example, the growing popularity of online shopping is leading to increased demand for delivery services.
Additionally, the growing health and wellness trend is leading to increased demand for healthy food franchises and fitness studios.
Challenges of Opening a Franchise
Some of the challenges of opening a franchise this year include:
- High Startup Costs: The startup costs for franchises can be high, especially for well-known brands.
- Competition: The franchise industry is competitive, so it’s important to choose a franchise with a strong brand and a proven business model.
- Following the Franchisor’s System: Franchisees are required to follow the franchisor’s system and procedures, which can be challenging for entrepreneurs who are used to having complete control over their businesses.
Some Tips for Success as a Franchisee
Here are some tips for success as a franchisee:
Choose the Right Franchise
It’s important to choose a franchise that you’re passionate about and that you have the skills and experience to run successfully.
Follow the Franchisor’s System
Franchisees are required to follow the franchisor’s system and procedures, so it’s important to do so carefully.
Provide Excellent Customer Service
Excellent customer service is essential for any business, but it’s especially important for franchises.
Manage your Finances Effectively
Franchises have ongoing costs, such as royalty payments and marketing fees, so it’s important to manage your finances effectively.
Get Involved in the Community
Getting involved in the community is a great way to market your franchise and build relationships with potential customers.
Why Do Business Owners Open a Franchise?
Whether you already have a business or not, deciding to open a franchise is a major choice.
The better likelihood of success in the initial few years after debut is one of the primary factors motivating entrepreneurs to purchase a franchise business.
Over 20% of enterprises fail in the first year, according to a Bureau of Labour Statistics study supported by Fundera.
Due to this, business owners experience pressure during their first challenging years of operation.
In addition to having to hire staff, develop a marketing strategy, develop an advertising plan, and establish brand recognition from scratch while starting from scratch, you will have to carry out these operations on your own.
It is worth mentioning that in the majority of franchises, the parent business handles several of these components.
While hard effort will still be required, franchising allows you to use tried-and-true methods rather than going through the learning-by-doing process that new firms must endure.
Income to Expect from Owning a Franchise
You can earn money based on the following variables:
- Paying back loans
- Reinvestment necessary for the business, including franchise fees
- Taxes
Before receiving compensation for themselves, franchise owners must cover these three costs.
According to research, franchise owners make an average of ₦600,000 annually as of December 2021.
This includes a base salary of roughly ₦350,000 per year and extra compensation of roughly ₦250,000 per year.
You could want to inquire with current franchise owners about the following matters to learn more about how much money they make:
- Since the franchise’s beginning, how much money have you made per year?
- What portion of that money did you keep?
- How much of an unexpected cost did you incur?
- What do you believe is a reasonable profit I can expect to make from owning this brand, given what you’ve seen?
The setting should also be taken into account.
Your profitability will be impacted if a franchise with the same name or a close rival is located nearby.
People also find interest in reading – 5 Easy Steps to Start a Home-Based Catering Service in Nigeria
How much are Franchise Fees and the Initial Investment Required?
As one might anticipate, purchasing a franchise typically requires upfront financial investment.
Franchise fees, or the costs associated with running a franchise location, are a part of owning a franchise.
Consider the franchise fee to be a rite of passage; you must pay to receive a share of the profits.
Franchise ownership varies in cost. A franchisee may be required to pay an upfront fee, which can be anywhere between ₦50,000 and more than ₦150,000, in some cases.
Then there are the recurring royalties and marketing costs, which are frequently based on how much money your franchise location produces each month.
Is Opening a Franchise a Smart Business Move?
For certain sorts of business owners, opening a franchise is a promising venture.
Franchises already have established operational methods, branding, and product delivery.
Therefore, it might be a terrific strategy to launch a firm if you’re an entrepreneur prepared to cooperate with and understand the corporate concept.
Conclusion
It can take just as much labor for an entrepreneur to open a franchise as it does to build a company from the ground up.
You have the freedom to concentrate on crucial business facets while working with a franchisor.
Therefore, the overall picture for your franchise is already finished if you can adhere to the guide discussed above
Therefore, it is believed that this article has equipped dear entrepreneurs who want to open a franchise with all they need to succeed in this new endeavor.
Good luck!
Frequently Asked Questions
What are the best ways to finance a franchise?
There are several ways to finance a franchise, including:
1. Personal savings: Many franchisees use their savings to finance their businesses.
2. Small business loans: Banks and other financial institutions offer small business loans to franchisees.
3. Franchisor financing: Many franchisors offer financing options to their franchisees.
4. Government programs: Several government programs offer financial assistance to small businesses, including franchises.
What are the most common mistakes that franchisees make?
Some of the most common mistakes that franchisees make include:
1. Not doing their research: It’s important to research the franchise and the industry before you invest.
2. Underestimating the startup costs: The startup costs for franchises can be high, so it’s important to accurately estimate the costs before you start your business.
3. Not following the franchisor’s system: Franchisees are required to follow the franchisor’s system and procedures, so it’s important to do so carefully.
4. Not providing excellent customer service: Excellent customer service is essential for any business, but it’s especially important for franchises.
5. Not managing their finances effectively: Franchises have ongoing costs, such as royalty payments and marketing fees, so it’s important to manage your finances effectively.
How much does it cost to open a franchise?
The cost of opening a franchise varies depending on the franchise and the location. However, most franchises require an initial investment of at least ₦50,000. Some franchises, such as fast food restaurants, can require an initial investment of over ₦3 million.
What is a Franchise?
A franchise is a business that is owned and operated by an individual or company (the franchisee) under the name and trademarks of another company (the franchisor). The franchisor provides the franchisee with the training, support, and resources they need to operate the business successfully. In return, the franchisee pays the franchisor an initial franchise fee and ongoing royalty payments.
References
Joan Chinyere is a dedicated content writer with nearly two years of experience writing for a financial and business-oriented blog. A graduate with a strong passion for entrepreneurship, grants, youth empowerment, and business ideas, Joan has honed her skills in social media marketing, social media content development, research, and digital marketing. Her work is focused on providing actionable insights and empowering readers with the tools they need to succeed in the business world.
