Business Case Studies

Posted 06 Aug 2019, Editor's Desk

How to Build a Successful Franchise Business

Introduction

  • Do you want to expand your business?
  • Do you know to know what makes a franchise successful?



Franchise is one of the easiest and fastest ways of expanding a business. If you want to know how to build a successful franchise business, you need to first clear about different franchise business models. 


Once you are clear with the franchise business model, you can look forward to investing your money in an established brand or even can set up your own franchise chain. 


Before getting into the details of how to build a successful franchise business, let us first understand why businessmen are more interested in expanding their business through franchise business.




Why go for Franchise Business?
One of the reasons that people go for a franchise business is its increasing success rate and decreasing failure rate.


  • In franchise businesses, the startup cost gets minimized because the working model is already made, and you don’t have to invest in various combinations to make your business come on track. 
  • In this business, you get a master franchisor that helps you in developing the skills to run and expand the business.


There are many advantages as well as disadvantages in the franchise business.


Let us first discuss what makes a franchise successful.



Advantages of Franchise Business

1. In this business, you get a proven trademark, logo and an established brand name.

2. An established working business model.

3. You get the customer’s ready footfall.

4. Everything is already defined be it the content, context, training, or print. 

5. A system to train your manpower.

6. In some brands, you also get the support of the national marketing team as well. This saves the investment of your extra money and time because the marketing is done by the team for you.



Disadvantages of Franchise Business

1. Higher Entry Cost and Ongoing Cost

If you want to know how to build a successful franchise business, then you should understand that taking up the franchise of an established and popular brand will cost you a lot. You have to invest a good amount of money.


On the other hand, if you start your own burger shop the cost reduces to almost 10% and the profit also increases. 

There are several franchisors that will give you their own infrastructure, software, database, and computer but in return, they will:

  • Keep a tight eye on what you are doing; you will be under strict surveillance.
  • Check the standard of the place, the database and everything, regularly. 
  • Not support you as you would have expected.


    All they are interested in is royalty.


    2. Lack of Flexibility

    Do you want to jump into a business where the possibility of bringing in some other product becomes zero?

    • In this case, you will not be able to bring in any new ideas or variations. 
    • You will just have to stick to the basic standards and follow them.


    Big brands standardize their processes and products as this is what makes a franchise successful. However, this restricts the franchisee.




    The bigger the brand the stricter will be their rules and norms because they already have a large customer base.


    So, choose wisely before you join hands with someone for kick-starting a successful franchise business.


    3. Thorough Research

    Thorough research of the brand whose franchise you want to take is one of the important factors of how to build a successful franchise business.  


    If you are willing to take the franchise of a brand, then do check that what it's market status is because your brand will also be known with the parent brand. 



    If your parent brand is not going well in the market, your reputation will also be hampered irrespective of the efforts and money you invest in it.


    So, you should do the following:

      • Check the brand’s product, positioning, and pricing. 
      • Go and meet the other franchisees of the brand and ask them about: 

      1. Gap between what they expected and what is deliverable.

      2. Gap between commitment and achievement.

      3. Support from the company.


      The above points are the factors that make a franchise successful.


      4. Check the Failure Rate

      Now after meeting the existing franchisees, you must go and search for some of the franchisees who have been shut down. 


      • Go and have a word with them to get an insight and the problem due to which they were forced to close down. 
      • You have all the right to know that where was the problem, was it with the franchisor or the franchise.
      • Check on the internet and decide only after you have satisfactorily done your research.


      5. Franchisor Controls all the Cards

      After finalizing the brand you want to work with, the documentation is the next most important part of how to build a successful franchise business. 


      • Before you sign the papers, get assured that they are benefitting you as well. 
      • Let your lawyer read the terms and ask him for guidance.
      • Carefully go through the agreement before signing and if needed negotiate things with the franchisor.


      6. Consider Doing it Yourself

      It is true that joining with a big brand will give you big business and will demand big investment but on the other hand, sometimes things can go well for your brand as well. 


      Who knows the brand you built that is low on business and investment could boom up and become a bigger brand.


      Business is not rocket science; it needs possibility, passion, a business mindset, and some analytical ability.

      Hope these points will prove to be helpful on how to build a successful franchise business. 


      Do you have a query..?