Taking the plunge to run your own business is certainly a leap of faith – not least as the world emerges from a pandemic that has devastated so many well-established companies across the globe. However, with the tumultuous 18 months behind us, society is focused on recovery; and with it comes a multitude of possibilities for fresh starts, new innovation and opportunity galore. One such way to open a business without all of the uncertainty is to buy a franchise… and in this brave new world we find ourselves in, it’s becoming more attractive than ever.
Buying a franchise offers the opportunity to establish and manage your own business without all of the risks involved that would usually be in place. Survival rates of new businesses starting on their own are very low, so anything that can be done to negate the liability is welcome amongst most entrepreneurs. But where to start? Let us help…
The Costs Involved in a Franchise
Typically, an initial fee is paid to the franchisor which purchases the permission to use the brand, the business model and systems of the franchise owner. From then on, a percentage of the revenue, known as royalty fees, are paid to the franchisor on an ongoing basis. The continued royalty fees usually pay for ongoing business support and evolving brand assets.
Some brands may charge a minimum royalty fee, which is paid regardless of your turnover level (note: Refresh Renovations does not charge this, royalties are payable on revenues only).
The price of the initial investment and the ongoing royalty costs vary from brand to brand, but you should also consider if there are additional requirements for stock, premises, shopfit or machinery (note: these are not required for a Refresh Renovations franchise).
Advantages of a Franchise
There are many advantages to buying a franchise and working within a parent company. These include:
High chance of business survival
Statistically, franchises have a higher chance of surviving their first few years than their unproven counterparts. This is in part because you’re buying into a tried-and-tested business model that already has found success elsewhere – taking the guesswork out of business direction and modelling.
Trusted brand name and direction
Franchises are usually well-established chain brands and so the public are already aware of the name and business. This existing reputation can be utilised to gain more business and build further brand trust. Many consumers aren’t even aware which businesses they use are franchised and which aren’t – after all, when was the last time you checked who ran the McDonalds you bought a drive-thru burger from?
Continued business support
Franchisors will provide ongoing brand assets and support to help their franchisees maximise opportunity and make the most of their business. This includes direction and aid on marketing campaigns and materials, staff training, premises fit-out and start-up support.
Simpler financing options
The initial investment to be made to buy a franchise is considerably less than it would be to start a whole new business from scratch, so profits can be recouped and a return on investment made faster. What’s more, the reputation of trusted brands means that if a franchisee does need to raise capital to initiate their franchise purchase, it is much easier to do than approaching lenders with an unproven business plan and idea.
Key Points of Investigation before you Buy a Franchise
Before you do take the plunge and buy a franchise, there are many angles from which the business should be investigated. You’d complete brand and market research before launching a new business, and franchises should be no different. Be sure to investigate in to the following:
The type of franchise and other franchised locations
Be sure that you fully understand the nature of the business and exactly how the franchise model works. Ensure that you know where other franchised locations are and that you have a good comprehension of local competitors. The contract length should be clearly stipulated, as well as any trading restrictions and rules.
How long has the franchisor been selling franchises for, how many do they have? What does the business look like globally? What support is given in regards to systems and lead generation?
All involved costs
All costs – the initial fee and the royalty rates – should all be written out clearly with nothing ‘hidden’ long in advance of any contracts being signed. Assess royalty fees against profit projections and factor in any other additional marketing costs that may be incurred.
Ongoing brand support is a critical element of running a franchise, and the levels of support vary between companies. Find out what training and support is available and utilise it as much as possible to boost your business!
Speaking to other franchisees – both within the business you’re looking to invest in and others – can help provide a great understanding of what you’re getting into and how you can expect it all to pan out.
All of these aspects of the Refresh business and more are covered in our discovery sessions and due diligence process, we look forward to presenting these to you.
Franchising is a bold business move, and for many, a hugely profitable one. If you’re ready to launch your own enterprise, the time has never been better!
To learn more about how Refresh Renovations support our franchise business owners, join us on one of our Discovery Days Here!