5 Advantages Of A Startup Franchise
Getting involved with a new franchise venture at the very beginning is a dream come true for many entrepreneurially minded people. It’s an opportunity not only to get involved in an exciting new concept, but also to access enormous growth potential. Here’s why you should consider a startup franchise on the route to entrepreneurship.
Running your own business can involve a lot of stress and hard work, which is why it makes sense to secure the backing of an established brand. But not all franchises have been in the game for decades; some are just starting out and opt to appoint franchisees as a rapid expansion method.
Although many people think the franchise industry is characterised by hugely successful household names like McDonald’s and KFC, there are many new businesses offering fantastic benefits. Joining a startup franchise could be your ticket to success and profitability.
Advantages of a startup franchise
- They often involve lower investment costs and fees– If a franchise hasn’t yet established itself as an industry leader or fully developed its franchisee resources and support programmes, the franchisor might ask for lower fees.
- They are often less financially risky – As many startup franchises offer low-cost opportunities, franchisees who invest in their systems take on a smaller amount of risk, compared to someone parting with their life savings. As a result, you may be able to reach your break-even point and grow your unit quickly.
- You can play a part in the franchise’s development– As there will only be a few franchisees in the network during a startup franchise’s early life, each investor has the chance to help the franchisor develop their strategies. You may be able to use your experiences to inform business decisions and help shape the future of the business.
- There will be lots of territories available– When a franchise has been around for a long time, it’s likely they’ll have appointed a string of franchisees, who have launched businesses in territories across the region or country. Invest in an established company, and you may find there’s already a franchisee covering your local area – but you’ll have the pick of the best in a startup franchise.
- You can get involved with exciting new concepts– If a franchise is new on the block, it may have used novel ideas, techniques or technological processes in its business model. Investors have the chance to start working in a groundbreaking business with exciting, or even industry-leading, practices.
Disadvantages of a startup franchise
- They have a higher risk of failure– While franchisees benefit from a low level of financial risk, they do have to be comfortable with the uncertainty surrounding the startup franchise’s future. The business may not yet have proven the success of its model across the country and won’t have demonstrated its ability to establish a significant brand presence.
- The franchisor may not have refined their support system– If you’re one of the first franchisees to come on board, the franchisor won’t have had a chance to perfect their training schemes and development opportunities. Of course, they may counteract this issue by providing more one-to-one and tailored support sessions.
- You won’t be able to rely on an extensive franchisee network– Being one of the first franchisees in a business can have its downsides. You won’t be able to consult previous investors to find out what life is like in the company before you invest, and you won’t be able to establish a support network when you first get up and running.
How to succeed with a startup franchise
Ask questions before you invest.
One of the first steps you should take when considering a startup franchise opportunity is to talk to the franchisor. Find out what they can offer you by asking questions like:
- Have you prepared standardised systems and processes across the franchise?
- Will you provide all the necessary resources – including training programmes, communication tools, computer systems, marketing materials and market data?
- Will you be available to help when I need support and stay in contact to make sure my business runs smoothly?
Once you’ve mapped out the franchisor-franchisee relationship and understand how it will manifest once your business opens, you’ll be in a better position to make an informed decision about investing.
Do your due diligence to evaluate the startup franchise’s viability.
Most start-up franchises provide potential franchisees with lots of data to demonstrate the viability of their business, but it’s vital you do your own research as well. Do all the figures add up? Has the franchisor missed any important factors with the potential to impact the success of your business?
This step might involve:
- Doing your own market research
- Examining potential competitors
- Looking at proposed franchise locations
- Evaluating estimated income and profit calculations
- Studying growth and expansion plans
Make sure there’s scope for growth.
Before you sign on the dotted line, you also need to find out how the franchisor is funding the initial set-up process and how they will finance growth in the coming years. Getting a new franchise off the ground can be expensive and takes a lot of continued investment.
So, make sure you’re confident the franchisor can meet their financial commitments and support their franchisees – particularly if the franchise takes longer to turn a profit than expected. You might like to check they’ve developed detailed and realistic plans for future expansion and can clearly explain how they’ll lay the groundwork for expansion over the next few years.
Source: Point Franchise – www.pointfranchise.co.uk
