5 Simple Ways to Ensure That Your New Franchise Succeeds
Buying a franchise and starting off on your own can be a life-changing decision. For one, you will be committing a great deal of money, possibly a good portion of your savings. You would probably also borrow from a financial institution or a bank.
The pressure on you to make a success of your franchise would be great. Your ability to meet your repayment obligations to the lender would depend on how well your new venture does and the amount of cash that it generates. You would also have to commit your time and energy to the franchise. It is quite likely that you would have to work long hours, especially in the initial stages.
Most franchise owners are willing to do everything that is necessary to ensure that they get off to a good start and meet their business targets. But your success often depends on how carefully you have selected your new franchise and the manner in which you have conducted the due diligence exercise.
Here are some steps that you can take to shift the odds in your
1. Select the franchisor carefully
There are literally thousands of options that are available. How will you make a choice? Don’t make the mistake of using only financial considerations. Say, the budget that you have in mind is $100,000 (including the sum that you intend to borrow.) Your choice should not be limited to only those franchises that you can afford.
Instead, find a business that appeals to you. More importantly, you should have some skills or expertise that will give you an edge over the competition. This could even mean that you select a business that only requires half your budget.
Visit an existing franchise and see how the business operates. Can you imagine yourself running a similar enterprise? It is also a good idea to speak to several existing franchisees to gain an understanding of the issues that they face.
2. Select an appropriate location
If the franchise involves renting a physical retail location, your choice will play a large role in determining your business volumes. An outlet in a high-traffic area could cost more, but the greater sales could more than justify the expense.
Selecting a location should be a carefully considered process. If you happen to see a large number of people in the area that you are considering, you may think that the location is an ideal choice. But it may be wise to dig a little deeper. Are the crowds seasonal? Or are there a large number of students? A university or an educational institution in the vicinity may result in low footfalls for several months every year.
3. Seek advice from an expert
When selecting a franchisor, the range of options before you can be overwhelming. You could shortlist five or ten companies and then try to make a choice after studying their brochures or websites. But if you do this, you would be severely restricting your options. Additionally, it would be highly time-consuming to conduct a due diligence of even a handful of companies.
Remember that selecting the most appropriate franchisor is critical to your success. How can you make sense of the multitude of options before you?
Using the services of an expert can help you in making your decision. The Entrepreneur Authority, a franchise advisor, uses a structured process to guide you in selecting a franchisor that best meets your needs and your skill profile.
An added advantage is that the service is absolutely free. The Entrepreneur Authority is compensated by the franchisor if you decide to sign on.
4. Develop your people skills
The results that you achieve will depend to a large extent on your communication skills and your personal effectiveness.
You will need to develop leadership skills and learn how to motivate your employees. Carry out a frank self-assessment. Do you know how to build trust and inspire your team? Are you a good listener? Will you take out the time to train your employees?
Cheerful workers who are willing to put in their best can be your greatest assets. On the other, disgruntled and sullen staff will drive customers away.
Don’t neglect this vital requirement. If you are unsure about your ability to manage others, it may be worthwhile to spend some time in acquiring the skills that are needed to lead and inspire your team.
5. Track your finances carefully
The cost structure in a franchise operation is higher than in an independent small business. You will have to make regular repayments towards the loans that you have taken to finance your franchise fee and to purchase fixed assets. Your employees will have to be paid and there will be a number of other administrative costs.
All these expenses will strain your finances, especially in the initial months when sales volumes are low. You will have to keep a close watch on your cash flow and ensure that you have the liquidity to meet all your commitments.
Even if you use the services of an accountant, it is essential that you remain completely involved in all financial matters. Monitoring your cash flow on a daily basis will provide you with the information that you need to cut costs and strengthen your financial position.
Follow the rules imposed by the franchisor
Finally, remember that you must follow the conditions laid down in the franchise agreement. Don’t try to save money by taking shortcuts or deviating from the franchisor’s stipulations.
It is your legal obligation to stay within the terms of the agreement. In extreme situations, breaking the rules could lead to your franchise getting terminated and result in large financial losses.