Getting in on the ground floor of an exciting new business venture is a dream come true for many entrepreneurially-minded individuals. Not only is it an opportunity to build a business from a blank slate, but the potential for growth is also enormous. So why don't more people consider the option of a start-up franchise when they’re looking to get themselves up and running? Here, we take a look at why start-up franchises could be the perfect opportunity for you to manage your own business. We examine the advantages of a start-up, as well as potential drawbacks, and also what you need to consider if you're going to make it work.
Benefits of a start-up franchise
There are many benefits to getting into a successful franchise early on in its development. First and foremost are lower costs. Joining a franchise before it has established itself as a business force that’s successful in the marketplace means many of the associated costs will be lower than they would be with a larger, better-known brand. This can be an attractive prospect for those that have done their research and believe the franchise has the potential for considerable growth. Top franchise opportunities are those that offer a high level of reward as they grow and expand.
Secondly, signing up as a franchisee early on can lend your position greater weight in the early stages of the franchise’s development. Though they need to be well planned, the initial setup phases for a franchise are, by their nature, more experimental and open to input from franchisees. While the franchisor will have attempted to account for every possibility and will have put in place a detailed plan for future growth, the first few months and years will require them to adapt to unforeseen circumstances and market realities. One of the fundamental ways they'll do this is by working closely with their franchisees and requesting feedback as much as possible. As the franchise expands and better tested and more rigid systems are put into place, this ability to influence the direction and day-to-day operations of the organisation is diluted.
Disadvantages of a start-up franchise
Though costs may be lower and your ability to influence business decisions greater, signing up for a start-up franchise does have one particularly significant drawback. Working with unproven but more affordable franchises means a higher level of risk. However, this shouldn’t put you off a start-up franchise, as long as you do your research, make informed decisions, and work to mitigate these risks.
The risk inherent in signing up with a new franchise is the same as starting any new business. Assumptions about profitability and future growth have been made on the back of facts and figures but are yet to be vindicated by hard evidence. Only time will do so. Mitigating these risks involves several processes, including extensive research, face-to-face meetings with the franchisor, and a thorough understanding of how the franchisor/franchisee relationship will play out. Below, we take a look at some of these ideas in greater depth.
Understand what your franchisor is offering
Key to developing a strong franchise and a healthy franchisor/franchisee relationship is understanding precisely what the franchisor is providing the franchisee. It’s important to ask a number of questions;
- Are standardised systems and processes prepared and ready to be put in place across the franchise?
- Will the franchisor make all the necessary resources – including training materials, communication tools, computer systems, marketing resources, and market data – immediately available to their franchisees?
- Will the franchisor remain available to those franchisees who require assistance and keep in close communication to ensure the smooth running of the entire franchise?
Once you’ve mapped out the franchisor/franchisee relationship and understand how it will manifest itself once business opens, you’ll be in a better position to make an informed decision about whether it’s a good opportunity for you.
Do your research on the viability of the business
Most start-up franchises will provide potential franchisees with reams of data to support their belief that the franchise will meet demand in the market and go on to succeed. All of this is essential information, but it's vital that you also do your own research into the business’ viability. Do all the figures add up? Has the franchisor missed any factors that may impact on the success of the business? Performing research on this aspect of the franchise may mean doing your own market research, examining potential competitors, looking at proposed franchise locations, working overestimated income and profit calculations, and studying growth and expansion plans.
Are plans for future growth in place?
The primary benefit of getting in early on a start-up franchise is the potential for significant growth. This is only possible if detailed and realistic plans for future expansion have been mapped out and are ready to be put in place. As a potential franchisee, you need to be assured that the franchise has a clear idea of how it’s going to grow before you sign up. Of equal importance, is confidence that the franchisor has the will and ability to continue supporting its franchisees as the organisation expands.
How is the franchisor funded?
Finally, it’s vital that you explore how the franchisor is funding the initial setup process and how it will finance growth in the coming years. Getting a new franchise off the ground can be expensive and require patience and continued investment. Ensuring that the franchisor can meet their financial commitments and support franchisees – particularly if the franchise takes longer to turn a profit than expected – is an intelligent means of securing your own future.
There can be no doubt that signing up with a start-up franchise can be a perfect opportunity for those who want to run and manage their own business. The potential for growth is substantial and lower franchise fees and setup costs can be an attractive proposition. That being said, the potential for growth comes with inherent risk. This risk can be mitigated against by intelligent decision making, careful planning, and extensive research. If you take your time and ensure it’s the right business decision for you, a start-up franchise could be the perfect opportunity to own a business that’s bound for great things in the future.
The Editorial Team, Point Franchise ©