Starting a franchise is different from starting another business. There are some advantages, such as brand recognition, marketing plans and help, and typically a pretty clear and proven business model. These same advantages can be a liability at times as well, as you don’t have the same freedom of creativity as you might with another business.
However, when it comes to financing, business support, and a reputable supply chain, a franchise is often the way to go, especially with your first entrepreneurial effort. There are some differences from other kinds of businesses, and there are some definite tips you need to follow if you are going to launch a successful franchise. Here are three of them.
Choose Wisely
This might seem like a no-brainer, but understand that many franchises fail simply because the owner did not choose well, and the franchisor did not vet them properly either. There are many examples of poorly chosen franchises, and some that are extremely successful because the prospective buyer knew exactly what they were getting into. Here are some things you should consider when making your choice.
- You’re going to have to work it. While it may be a dream to simply hire a manager to take care of your franchise for you, it seldom works out to be a hands-off or absent owner. You will have to be able to work the grill if you own a fast food franchise, and you will want to know how to make a latte if you own a coffee shop.
- Show me the money. A franchise is a significant investment, and while you can often get financing through the franchisor, you will still have to pay that loan back and pay yourself as well. Understand the money you will need to have in the bank before your new enterprise will become profitable, and be sure your expenses and that of the business are covered.
- Enjoy it. A franchise is about more than just making money, and at least for the time that you own it, that business will take up a good chunk of your life and time. The more you enjoy it, the easier that time will be.
- Plan for the future. Do you want an exit from this franchise that involves selling it? Do you want more of the same franchise? These answers will determine how you invest your time and money.
- Location, Location, Location. Not every place is a good fit for every franchise, so make sure you research where these franchises might do well, and the best cities to start a franchise.
Not every franchise is for everyone. If possible, talk to others who own franchises from the same company or a similar one, told Matt Frauenshuh, a Chief Executive Officer of Minneapolis-based Fourteen Foods. Matt Frauenshuh joined his family`s Dairy Queen franchises in 2006 when the group comprised only seven stores across the country. For the next 15 years, he would expand their holdings to 240 franchises and become the largest Dairy Queen franchise in the world. He started as an assistant manager and worked his way up. As of March 2011, Fourteen Foods owns and operates 120 DQs in seven states and has over 4,000 employees. Fourteen Foods operates on 14 core values that are focused on faith and family and speak about what Frauenshuh personally believes in.
Ask them questions about how profitable the business is, how much hands-on time they spend, and what their favorite and least favorite parts of ownership are. Educate yourself about franchises, franchise financing options, and what each one means to you.
Once you have chosen the franchise you will launch, you’ll need to take some simple steps to make sure it will succeed.
Protect Yourself
While owning a franchise does put you under the umbrella of a parent company, there are still some important things you need to do to protect yourself and your assets. Here is a short list.
- Incorporate. It does not matter if you are an LLC or an S-Corp, although each will have its advantages depending on your franchise, but you need to separate your personal assets from those of the company.
- Hire an accountant unless you are one. A professional accountant will help you navigate your tax liability, can help you manage payroll and other legal financial matters, and ideally will help you be more profitable.
- Hire an attorney. This is not only to look over the legal contract you will be signing with the franchisor, but to protect your other legal interests as well. Be sure you have a good, experienced business attorney or firm on some kind of retainer.
- Get business insurance. When you are starting a business is one of the best times to get business insurance, and it is important that you talk to an agent about your specific needs.
- Consider safety. Know the concerns for your area, like the advantages of sealcoating a parking lot before winter, what responsibilities you have, and what the city or shopping center you are in take when it comes to litter, debris, parking lot markings, and other safety related items.
- Look at workman’s compensation insurance, and be sure you have what your state legally requires.
- Study labor laws and understand what your legal responsibilities to employees are. Nothing will derail your business faster than labor issues.
- Understand the supply chain. Warehousing, inventory control, and other infrastructure details are what keep your business running. Even if the franchisor handles those for you, understanding them will make you a better owner.
Remember, even though the parent company has some responsibility, you will own your own business, and you can be liable for many things that might happen on the premises and around them. It is your job to protect yourself and make sure you are in compliance in key areas.
Become a Marketing King
Yes, there are things your parent company will do. They might even provide you with a web URL and some local support, but this is still your business, and the key to success is marketing to the right customers at the right time.
To a large degree, most of your marketing will take place online. This means that you will need to create and run a small business website. There are a few simple parts of this.
- Determine the purpose, and what you want customers to be able to do. Many websites allow for scheduling of appointments or in the case of restaurants making reservations or just contacting you. Determine the primary purpose of your website.
- Choose a Domain Name. If you are not given a URL from your franchisor, you will need to choose a domain name. This must include the name of your franchise, but might also include your city or your company, or a blending of both.
- Choose a Host. There are countless choices here. Sometimes this is a part of your franchisee packet, but others you must find your own.
- Build Your Site. Even if you are given a site template, for it to be really successful you will need to build it to match your location and your area. Build your site, add content, and make sure everything is accurate regarding your location.
- Learn and Master SEO. This is the way you are discovered, and if there are other franchises from your parent company or you are in a competitive location, a website with good SEO can mean the difference between success and failure.
A website is just the start, though. There are also social media channels that can be really important. Building connections and an audience on these platforms can mean big success. You may not have time to do all of this yourself, but you can automate some of it, and even hire a social media manager if need be.
Better yet, a marketing team can often ensure your message is the same across several platforms, making sure you are consistent and reaching your audience effectively.
A franchise is a different kind of business, and a successful launch depends, at least in part, on understanding these differences and embracing them. Choose wisely, protect yourself, and use SEO and marketing techniques for both a great beginning and ongoing success.