How to start a retail business

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How to start a retail business

Before we get into the main article, let’s take a look at why you might want to set up a retail business.

Advantages

  • You can develop a relationship with loyal customers to encourage repeat custom. Most businesses strive to develop loyal customers or clients who return to use its products or services again and again. When you are part of a retail business, you can increase the likelihood of this by fostering relationships with your customers.

    Something as simple as complimenting a buyer on their choice of product or offering up a little bit of extra information about a certain item often goes a long way. If customers remember the friendly atmosphere of your business, they’re more likely to return. It can be particularly beneficial to give customers extra information about products as they shop, as this can promote a sense of expertise, giving visitors confidence in their purchases.
  • You can benefit from passers-by wandering in. When you’re in a town or city centre, the majority of businesses you’ll see are retail businesses. This gives these companies a distinct advantage over others; they can entice extra customers through their doors. People who didn’t set out to visit your store or who wouldn’t otherwise have discovered your brand will explore your outlet and may even buy something. You can increase the chance of this happening by creating attractive window displays and making promotional material visible from the street.
  • You can watch people get joy from their purchases. Depending on the type of retail business you run, you may have the power to make a customer’s day. Being able to give someone that special product they’ve been dreaming of makes the retail sector an extremely rewarding one. It’s called retail therapy for a reason – shopping really does have the power to lift the mood and bring joy to your day.

Disadvantages

  • You’ll probably have to work long hours. There’s no getting away from the fact that retail businesses demand a lot of time. In the initial stages, you will almost definitely have to work evenings and/or weekends, as this is probably when your business will make most of its profit.
  • You may have to deal with difficult customers. Even if you aren’t unfortunate enough to be faced with angry or violent customers, you will definitely meet individuals who have very specific requirements or requests. It is your job to deal with these as efficiently and professionally as you can.

Also, if you’re to start an independent retail business from the ground up, there are several time-consuming steps you’ll have to take before you can get the business up and running. To name a few, you’ll need to choose a name, register for the relevant licences, identify suitable suppliers, develop a brand identity and create your own marketing campaigns.

Many of these phases can be skipped by franchisees, as they’ll benefit from the established business model of an existing retail business. In this article, we focus on the process of becoming a franchisee in the retail sector.

Become a retail franchisee

Of course, becoming a retail franchisee is still a long and arduous process, but it can be a very rewarding one. To make a success of it, franchisees need to be sure they know what they're signing up for. That means knowing whether they’re prepared enough to take on the responsibilities of being a franchisee or whether they’re not quite ready.

Here, we provide you with an eight-point checklist that should help you work out whether you have what it takes to make it as a retail franchisee.

  1. Make sure you have a passion for retail. Perhaps your passion is food and providing families and friends with a dining experience they'll never forget. Maybe you have a passion for e-cigarettes and can think of nothing better than starting up your own vaping franchise. It doesn’t matter what type of retail franchise you’re buying into; you’ll still need a fiery passion for the industry if you’re going to succeed. However, it’s also important to understand that not every day in your franchise is going to be fantastic. There’s likely to be a lot of blood, sweat and tears before there’s the joy of success, so be prepared to ride out the tough times to get to the good ones.
  2. Put in the hours. A retail franchise requires you to put in an incredible number of hours, particularly when you’re starting out. It’s not uncommon for retail franchisees to work 70 hours a week to get their business off the ground. While your weekly hours would reduce when the franchise is established and you're sure you’ve got a good team in place, that first couple of years demand perseverance, courage and an ability to keep going even when you're running on empty. If all that hard work puts you off the idea of franchising, maybe you’re just not ready for the role of retail franchisee.
  3. Follow instructions. As a franchisee, you are technically your own boss. However, this doesn’t mean that you can do what you want. Most franchises – but particularly famous franchises with a hard-earned reputation to uphold – will want you to follow their operations manual to the letter. Generally, franchising works because it takes a relatively simple business model and provides franchisees with a step-by-step guide to replicate it. They don't want franchisees to alter the secret formula and they don't want them to demonstrate much independence. In retail, it's often the case that the best franchisee is the one who does what they're told.
  4. Give orders. That being said, franchisees also need to be able to give orders. As the business owner and manager, it is your responsibility to ensure that all the staff understand what they're doing, know the rules and work productively and profitably. You need to be able to manage them, motivate them and ensure they're maintaining high standards. Most of the time, the only way of doing this is by giving clear and concise orders. If you struggle with telling people what to do or aren't comfortable making tough decisions when an employee isn't working as they should, a retail franchise may not be for you.
  5. Build a team you can trust. Although you’ll likely take a hands-on management approach in the early days of your new franchise, you’ll still need to build a team you can trust. Franchisees must keep a close eye on how employees are performing, but it’s impossible for them to see and know everything that’s going on in-store. Consequently, franchisees need to be able to hire individuals they can trust to do the right thing. This requires you to be a good judge of character and demonstrate that you can also be trusted to do the right thing by your employees.
  6. Develop business know-how. While the best franchise opportunities are those that provide their franchisees with an incredible amount of training and support, they won't be able to teach you basic common sense. As a franchisee, it's vital that you're able to tap into some essential business expertise rather than just muddling through. Just because you have the backing of an established franchise, it doesn’t mean the business is going to run itself.
  7. Understand your financial position. While you may have the initial investment required to start a retail franchise, you won’t necessarily be able to afford the franchise itself. Franchises often need a great deal of working capital and usually have to survive an initial period in which the business will struggle to break even or not make a profit at all. Consequently, you need to make sure that your finances are in order before you invest. Once you've paid the franchise fee, the royalty fee and operating costs, will you still be able to pay yourself a reasonable wage? Do you have the financial backing to survive a difficult first few months?

  8. Commit. Finally, if you're considering starting a retail franchise, you need to understand that you're committing to an extended period of collaborative work with your franchisor. While most first-time franchise contracts last around five years, to truly reap the rewards of your business, you may need to commit to 10, 15 or even 20 years of hard work. With this in mind, we recommend that franchisees think long and hard before they sign their franchise agreement.

Summary

As with all types of franchises, retail franchises require you to be hard-working, passionate and dedicated. Without these qualities, you'll struggle to make a success of your business. However, retail franchises, in particular, place many unique demands on franchisees. Hopefully, our eight-point list will have given you some idea as to whether you're prepared for the role or not. Remember to do your research, discuss the role with your would-be franchisor and request legal and financial advice before you make your final decision. If you'd like to learn more, don't hesitate to get in touch with us at Point Franchise.

>> Read more articles on the Retail sector

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