IS FRANCHISING FOR YOU?
Investing in a franchise can be a great way to own a business without having to experience all the hardships of starting from the ground up. Instead, the franchise business model allows for people to ‘piggyback’ off an already established brand and benefit from its proven systems and processes.
However, it’s important to understand that as a franchisee you will be restricted in the way you do business under the brand. It may not suit everybody and it’s a business decision that should not be taken lightly. You should be rigorous in your research before signing a contract to purchase a franchise.
We have pulled out some relevant points that you should consider before buying a franchise:
Take a personality test
Your personality may be a big factor in whether or not you’re going to succeed in your franchise business. Not everyone has a personality that fits the model of being an ‘implementer’, rather than a ‘creator’.
Personality traits such as dominance, compliance and influence can be determined by several quick and easy personality tests online such as Myers Briggs, Kiersey, and DISC.
Consider your strengths & weaknesses
If you have never owned a business before it might be hard to know how you will handle certain areas of the business.
Here are some questions to consider:
- Are you experienced in sales and have a knack for customer service?
- Are you happy to deal with customers throughout the sale process or are you better off hiring someone to take care of that side of the business?
- How are you with technology and working in front of a computer for long hours?
- Answering questions over the phone?
Sitting down and auditing your strength and weaknesses will give you a good idea of where you might need some training or a helping hand, and where in the business you will thrive.
Know the experience required to become a Franchisee
Starting any new business presents risk and success is never guaranteed. To eliminate as many risk factors as possible, the Franchisor requires certain skill criteria and experience from business prospects.
These criterium will differ depending on the industry, but general values and standards may include the:
- understand the challenges of the industry.
- have a ‘can do’ attitude.
- are committed to running the business and the effort required (particularly in early years) to reap the rewards.
- are enthusiastic about their future and creating success.
- are flexible thinkers open to new ideas in a spirit of constant improvement.
- take pride in their work, results, reputation and client satisfaction.
- reflect on the genuine quality, real service, honest transparency, and community spirit.
- can make a long-term commitment.
Find out what you need to join the Stroud Homes team of builders.
Understand your franchise territory/area
When buying a franchise you will be buying into a territory where you’re allowed to do business under the brand name. You might have certain postcodes, suburbs or geographic areas your clients can come from to use your business. Operating outside of those boundaries may get you in trouble with fellow franchisees as it is considered their business turf.
Before signing a contract, find out how many available territories there are if there is an opportunity to expand and buy adjacent territories in the future, how many are planned for the future, and how online sales are managed within territories.
Do your research online (and dig for dirt)
Logically you should conduct as much research on the company you’re wanting to buy into as possible – but we’d recommend digging a little deeper. Reading what current franchisees and the company directors etc have to say will only give you one side of the coin. Looking at reviews & testimonials online and talking to former franchisees may paint a more nuanced picture of the franchise business and how healthy its company culture really is.
Talk to other franchisees before buying in
Speaking to current franchisees is one of the most important points on our list.
To get a well-rounded picture we would recommend speaking to at least a dozen franchisees and asking them questions relevant to the business such as:
- How long did it take you to become profitable?
- How much did you spend initially?
- How supportive are the head office and the other franchisees?
This will enable you to better prepare for what you’re about to face in the business and the industry as a whole.
James Stroud meeting with Stroud Homes Ballarat builders Brad and Simon.
Do a cost/benefit analysis & create a business plan
It’s an old but effective exercise when trying to work out the budget for a new business venture. Weigh up the pros against the cons in terms of the financial situation – how much will you have to make in profit the first year to make up for the initial start-up fee you will have to pay to the Franchisor? Then you create a business plan based on your findings.
You will have to factor in various financial risks, both in and out of your control (e.g., the state of the local, national and even global economy), and whether you’re likely to be able to recover your upfront costs and make a profit during the term of your franchise agreement.
Understand the franchise agreement & disclosure statement
Before signing with a franchise business, you have to carefully read and understand the Franchise Agreement and the Franchise Disclosure Statement. Franchising in Australia is regulated by the Franchising Code of Conduct, documents that should be provided to you by the Franchisor before signing the contract. The disclosure statement can seem intimidating at first, but by methodically going over each point you will receive invaluable information about the business, such as training provided, holiday opening hours, litigation, bankruptcy filings and much much more.
The Franchise agreement will outline what’s included in the contract between the parties and for how long. It’s important to note that once the contract has run its course (usually 5-10 years) the franchisor is under no obligation to renew the contract.
Find out about any ongoing costs
Besides the start-up cost, you will also pay ongoing fees or royalties to the franchisor. These fees can include equipment, training and marketing. The ongoing fees can be set either as a lump sum each month or as a percentage of your overall profit. Stroud Homes does not have a set monthly fee, but if you want to find out about our service fee and marketing fund contribution, please read through our FAQs.
The hours & commitment necessary
Starting and running any business usually requires a huge commitment in terms of time and hard work, especially during its early years. Starting a franchise business is no different. Although the brand is already well known and you’ll enjoy several other advantages, you as a business owner will still need to learn the business, understand your customers and ensure your making a profit.
It’s important to have a realistic idea of your work/life balance when starting, and if done right, after some time you will be able to step back from the business and have greater time to enjoy the rewards.
Become a Building Franchisee Owner
Stroud Homes uses a reputable business formula for its franchisees, providing them with the support and expertise needed to maneuver all aspects of a prosperous building franchise, including a team of professionals who are fully dedicated to seeing you and your franchise prosper.
Take a look around the information on our website and gain some insights into what it is like to be a franchise, what we are looking for in a successful franchise owner, and our selection process also check out our current building franchises for sale.
For more detailed information please enquire today to receive the full Franchise Information Pack.