Tuesday, September 6, 2022
Create your own business thanks to franchising: 6 key steps to get it right!
Create your businessBecome a franchisee
Launching your business as a franchise calls for a few precautions. While there are many common areas with traditional entrepreneurship, there are a few subtilities worth looking out for. Take a tour with us.
As with any new business, becoming a franchisee requires anticipation. Before you race into it, follow these 6 key tips to get ahead in franchising.
1. Be clear about your project
The first thing to do before you become a franchisee is very straightforward: write down your skills and your wishes, but also what you don’t want to do in your future life as an entrepreneur. Also get a view of your financial capacity, as this will determine the sector of activity and also the brand you can hope to join. Finally, make sure you’re ready to set out on your own in business. While the franchising model is a great way to get started with more peace of mind, don’t forget that you’re going to be your own boss, and that it will call for a lot of personal investment. In retail, for example, you will certainly be required to work long hours, and at weekends. These constraints may have an impact on your everyday life, especially if, like 70% of franchise candidates, you’ve been a regular employee up to now.
2. Choose your sector of activity
The choice of sector of activity is crucial since it’s going to be your profession for the next seven years that, on average, your franchise agreement is set to last. If you have a passion for something, why not consider going in that direction, although here too, you may want to exercise caution. Because between an idealistic passion and the tough reality on the ground, you may end up disillusioned. For example, just being a flower enthusiast doesn’t mean you should become a florist. In the latter case, remember that you’ll be working in a moist environment and getting your hands wet all day, which may inconvenience you. Finally, as franchising is a springboard to changing jobs, don’t hesitate to look into little-known sectors, even if on paper it looks a bit technical or difficult. Your franchisor will give you all the know-how you’ll need to be operational as a franchisee!
3. Compare the brands
Picking a sector is one thing, but choosing a brand is another. More than 2,000 networks exist in the form of a franchise (or another type of contract). So feel free to compare brands between one another, whether they are in the same line of business or not. Look closely at the franchise agreement duration, the conditions of access to the network (the franchise fee, the royalty fees, the cost of training) and the overall investment you’ll need to start up. Then contrast all this with the turnover you hope to make. More importantly, analyse the type of support the franchisor is offering to help you get started but also throughout the duration of your agreement. You can also analyse the DIPs offered by several brands, or go on a day’s immersion. That will give you a first glimpse of the activity, and of the relations you could build with the franchisor. Finally, don’t rule out concepts that might be offbeat, premises-free or just emerging. There may be some fantastic opportunities in these new networks.
4. Find the right premises
If your activity needs premises, rely on the experience of the franchisor. Analyse in which type of location the brand’s concept performs best: in a city centre, a shopping mall, a retail park or an industrial zone, etc. Depending on the network’s specifications, you may be the person making the ultimate decision on the right premises. Do not hesitate to validate their viability through a market survey. While this requires personal and financial investment, especially if you call on the services of geomarketing professionals, it will enable you to clearly determine whether the location is right. Also pay attention to the terms of lease of your new premises. Be vigilant about the amount of the rent, but also the way it is calculated. This can have an impact on your profitability.
5. Build a solid business plan
This is the ultimate step to win over banks and lenders: putting together a business plan, meaning a sales forecast, generally over the first three years. Base your calculations on the information provided by the franchisor, but don’t use them as your only source. Bear in mind that even if you are backed by a brand, you are still your own boss. You will be bearing the risk and the investment. It is therefore necessary to build your forecasts independently. The market survey you conduct will help you substantiate your business plan. In your forecasts, don’t be too optimistic: be as realistic as possible. With the economic environment having been a little choppy in recent years due to Covid and then inflation, consider drawing up several scenarios. That will show the banks that, whatever the situation, your company will be viable. It also proves that you are familiar with your economic environment and that you have fully taken it into account in your future life as an entrepreneur.
6. Ask for help from outside
Throughout your entrepreneurial journey, don’t hesitate to get help from people. This is important to give yourself the best chances of success – particularly if running a business is totally new to you. Enlist the help of a chartered account to build your business plan, and a legal adviser to read and fully understand all the clauses of the DIP and the franchise agreement, but also feel free to ask your future franchisor all the questions you want to ask – and in as much detail as you need.
You can meet all these professionals at Franchise Expo Paris from 19 to 22 March 2023. During your visit, you’ll have the chance to fine tune your project – but also discover hundreds of exciting franchise brands!