Running a franchise business

Due to the high costs connected with establishing and running one’s own company, many people decide to launch a franchise business. Undoubtedly, this form of business activity is far less expensive, however we also run the risk of being taken over and becoming a part of nonviable system. This article presents a couple of advices for people interested in starting up a franchise-based business.

Making a decision
Before we can launch a franchise business, we are obliged to pay a variety of membership fees, as well as the fees connected with selling products under the particular brand. Therefore, a decision to invest money into a given franchise system should be preceded by an in-depth analysis of the system’s current situation.
The crucial aspect is choosing the sector we want to focus on. The best solution is investing in the area which is known by us and in which we possess certain expertise and extensive knowledge. Such an approach will facilitate the choice of the appropriate strategy, according to which we will acquire new customers. One of the undisputed advantages of a franchise system is the possibility to sell well-established, branded products. However, this factor alone, does not ensure the viability of the whole enterprise. Therefore, our individual skills and knowledge, (ideally supported by some practical experience) will surely help us in taking first steps in business.

Financial condition of the franchise network
The current financial condition of a given franchise network should give us a clear indication of its viability. Theoretically, the verification of the documents and reports concerning the company will give us a good overview of how the company is functioning on the market.
It needs to be pointed out, that companies are not obliged to reveal such documents and, in fact, they rarely do it. However, reluctance to make the reports available to the public may also suggest, that a company is deliberately hiding certain information regarding financial fluidity.

What’s more, we can gain a lot of useful information by contacting the current (as well as the former) franchise holders. First of all, we should pay attention to the real fees and costs connected with running a franchise business. Former franchise holders may tell us about the potential disadvantages of a particular system as well as about the possible profits.

Researching the history of the franchise network
Under the term ‘franchise network history’ we understand its previous financial condition, as well as the total amount of pilot units run by the network. The growth rate assumed by the entrepreneur will tell us about potential future investments. Therefore, we will be able to assess the prospects of development and measure the potential market saturation concerning a given service. If we decide to start a franchise business, a decrease in the dynamics of market expansion may result in lower profits.

Finally, the financial provision of the franchise network will definitely help us in making a decision of participating in the project. Additionally, the longer the period of the provision, the more certain we can be that the company is a reliable and strong business partner.

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