4 Things You Need to Open a Franchise
One of the most popular questions we get asked is, “What does it take to open a franchise?”
It’s a very important question, but for each individual person the answer is going to be slightly different. As you explore opening a specific franchise, they are going to be very clear with you about what it takes to open THEIR business.
However, at the highest level, there are four different things you’re going to need if you want to successfully open your own franchise.
Here they are:
1.Money – Every single franchise out there is going to require you to have a certain amount of capital in order to open a location. For some franchises, you need thousands of dollars and for others, you need millions. Not only are you going to be required to pay a franchise fee when you agree to become a franchisee, but you’re going to need money for real estate, supplies, payroll, etc. Often times franchises will publish a number of different financial metrics to help you understand its requirements e.g. franchise fee, liquid capital required, net worth required, initial investment, etc.
2. Time – Whether you plan on actively managing the franchise or hiring a management team to operate the franchise in your stead, owning a franchise takes time. For some people, becoming an entrepreneur means that they spend every waking hour working on the business. For others, it’s more like hiring a manager and checking in on them and the health of the business on a semi-regular basis. Either way, owning a franchise is going to take time. Make sure you’re not already burning the candle at both ends before opening a franchise.
3. Energy – This one is a little subtler and related to time, but you’re going to need quite a bit of energy. This also comes in two separate forms. The first is the energy that you need to actually operate the franchise. For certain franchises, this means moving from behind a desk and computer screen to being on your feet all day. For others, it may mean spending long hours making marketing phone calls. And for a third group, it could mean hiring lots of people. In addition, your staff is going to look to you to lead the company. So your energy level is going to be contagious. A complacent, low-energy CEO can spell disaster for any company, so make sure you’re ready to give it all you got.
4.Entrepreneurial Spirit – The last thing you’ll need is also the least tangible. Ultimately, opening a franchise is a risk. Sometimes franchises turn into multi-million dollar enterprises and other times they go bankrupt. You’ve got to be willing and ready to understand the risks and meet the challenges head on. The U.S.A. was built by people who weren’t willing to be complacent with yesterday’s answers. And you need to be in that vein. If you’re a super risk-averse person, then owning your own business may drive you crazy. But if you’re that person who’s ready to make things happen, franchising may be for you!
That’s it! Four things! Simple, isn’t it?
That’s what we always say. Opening a franchise is easier than you think. Because the franchisor handles a lot of details associated with how you run the business, the qualifications for ownership are fairly easy to understand.
So, are you ready to see which franchises are right for you?
Franchise Buying Tips: Purchase Without Passion
Yet that is exactly what most franchisees do. It's good to be enthusiastic about your future business plans. It's bad to fall in love with the deal and let your emotions take the lead. Think that won't happen to you? If you talk to a hundred franchisees you will find that few knew exactly what they were getting into. Most are sensible people with plenty of information who selectively twisted the facts to support an emotional decision.
What is an Area Representative?
The reason why anyone would choose being an Area Representative is that they are paid a certain portion of the initial franchise fee of each new franchisee they solicit as compensation. Aside from the sales commission the area representative may get paid by the franchisor a portion of the royalties received for servicing franchisees. In some cases, franchisors will pay the area representatives a portion of the fee received from new franchisees in the reps’ territory even though the area representative may have had nothing to do with the screening or recommending that particular franchisee. However, all these and other contingencies- such as compensation for furnishing many of the pre-opening and on-going services to the franchisee- should be covered in the area representation agreement.
Best Practices in Protecting and Enforcing Trademarks, Copyrights and other IP
Trademarks, copyrighted works, trade secrets and proprietary business information form the core of any franchise system, and are frequently a company’s most valuable assets. Trademarks, including service marks, logos, slogans and trade dress, define the brand identity as presented to the public. The “behind the scenes” business know-how on which the system is built and implemented by franchisees is embodied in a variety of copyrighted and proprietary works – operations manuals, proprietary processes, recipes and formulas, custom software, advertising copy to name a few.