Wednesday, January 20, 2021Canada's Leading Online Business Magazine

Finding Your Perfect Franchise Match

Franchising_Finding_your_Match_670453464

The number one question I get asked by prospective franchisees is what is the best franchise? Usually these individuals want me to give them the ‘inside scoop’ on which franchises are the most profitable. I believe that finding the right franchise is a lot more complicated than simply judging profitability. Let me take you through the steps I recommend that our clients use to select the right franchise for them and to determine what growth strategy they should employ.

Investigating Your Options

Franchises can be a good way to start your own business; there is no question about that. When looking to invest in a franchise, there are three things you should take into consideration:

What’s the Market?

When considering franchises, there are a couple of things I believe you should keep in mind. Firstly, you might want to stick to something you know and are interested in. For example, if your background is in writing or teaching, a franchise accounting or computer repair business may not make a whole lot of sense.

Another thing to consider is the market for your franchise. If you are thinking about opening a tutoring franchise aimed at college students, it won’t make sense if you live in a small town with no college or university. No matter what kind of franchise you are considering, it’s a good idea to do some market research first before you dive in.

What’s the Cost?

A big consideration in franchising is how much the franchise costs and whether you can afford to invest. Some franchises, such as restaurants, are very capital-intensive, because you need a space in which to operate as well as expensive equipment. Other franchises require only a small investment for materials. Most franchisers also require that the money you invest is your own rather than a loan or investment from someone else.

Another thing to keep in mind regarding cost is how much of an ongoing franchise fee you have to pay. Most franchisers base fees on how much you make and take a percentage of that profit. Some franchisers also charge set fees for things such as shared advertising buys. You need to make sure you understand the fee structure and feel comfortable that you can be profitable.

Will you get Support?

A big factor in the franchise equation is how much support you will get. If you are getting into a business that you understand well, you may only need training on the specific franchise system and not need a lot of handholding on the overall business. On the other hand, if the business is somewhat new to you, you may need more extensive training. Make sure you understand what training comes standard with your franchise and what, if any, extra training is available and if you are required to pay more for that training.

Once you’ve narrowed down what franchise you are interested in, you need to move on to the next step, which is determining what growth strategy to take.

Growth Strategies

Franchisers provide a range of different formats for growth to the business owners that decide to join them. Each format comes with its own unique chances for development and growth over time. Comparing the challenges and benefits of each growth format will help you decide what you are capable of handling at this point. If you choose the right brand, you may be able to upgrade to a more expansive format as your experience with the company grows.

The most basic format is the single unit agreement. One franchisee opens and operates one location. However, other options are available that include:

The multiple-unit network

Franchisees sign numerous single-unit contracts with the same company. Some business owners open multiple locations in their region, while others branch out to cover large geographical areas. These various agreements may be collected at some point into another growth format.

Exclusive area development contracts

The franchisee lays claim to a specific geographical area and promises to operate a certain number of locations in that region. The company agrees not to allow other owners to open locations in that area for a certain period of time. Missing a deadline for expansion will invalidate the agreement and cause competition to move in. Each new unit will trigger the signing of a single unit contract.

Master Franchisee rights

If you manage to secure one of these agreements, you will be granted the right to sub-lease the franchise to other owners in your area. You will still need to run at least one store of your own and help your sub-owners manage their stores. In this situation, master agreement holders tend to get part of the royalty payments from the members they have contracted.

These agreements can vary slightly between companies, so it is important to check your contracts before signing anything. All of these high growth formats allow you to expand your venue streams. You can spread your investments among multiple locations, ensuring that your success in one area offsets any lack from under- performing stores. There are lower costs for many administrative functions when you are running multiple locations at once.

You will need to have a lot more money on hand if you intend to start a multi-unit agreement at the very beginning. Opening a few locations through single unit agreements will help convince lenders that you can handle even more locations. Don’t forget to forecast repair and renovation costs for your existing locations as time passes. You won’t be able to meet your deadlines and targets if your budget is eaten up with routine spending.

I hope you can see now that the answer to the question what franchise is the best is not as easy as it first appears to be. Selecting the right business to join and what approach to take is a very personal decision. This is not a simple process and you should allow yourself plenty of time to perform your due diligence. I can tell you that in my experience that if you find the right fit for you, that franchising will provide you with a comfortable lifestyle and sense of professional fulfillment.

I wish you all the best on your journey to finding your perfect match! 

By Robert Lancit

Robert Lancit is the President of FranTech Media, which created Canada’s most comprehensive and effective online franchise directories:
BeTheBoss.ca, BuyThatFranchise.ca & PlaneteFranchise.ca Rob can be reached at:

rob@frantechmedia.com or

www.FranTechMedia.com

Recommended
Naleway_Foods_690122799Assertive_Excavating___Demolition_524110155