When it comes to business ownership, franchising is an attractive option for entrepreneurs because of the turnkey processes, established brand name and proven track record of the entire system.
Even with these advantages, you still need to do your due diligence based on your individual skillset and goals as an owner. For example, some brands require more operational execution, which is a completely different skillset from a business that is more marketing driven.
So, before signing on the dotted line with any franchise, here are five key tips to consider to ensure you are set up for success:
1. It’s going to take work.
Some entrepreneurs have the idea that owning a franchise is a passive investment, but, in reality, franchising is running a small business– which is anything but passive. While franchise systems have a support structure and more processes in place than you would have if you started something on your own, it’s still imperative that you are involved in all facets of running and improving your business.
Even if you hire a manager to run your location, it takes an active owner to be successful because you will always care about the business more than anyone else. There is no substitute for an owner that is actively engaged in the business and looking for continuous improvement. Franchisees can be successful in running multiple units of the same brand, and multiple units of different brands, but by and large, the biggest commonality between franchisees who are successful and unsuccessful are those who are engaged in their business and those who are not.
2. Talk to franchise owners in the system.
The best way to understand what the intricacies of a franchise are that drive success is by talking to other franchise owners in the brand’s system. What are the key performance indicators (KPI’s) that identify and help you understand the business, and what drives success forward?
For example, in a membership-based business, learn information about the trial, conversion rates and attrition rates. In a restaurant, you’d want to understand the operational complexity and cost management amount several metrics. If you’re a convenience-oriented food provider, how do you efficiently run the kitchen to provide proper speed of service that is critical to customer retention? Really understand what those success drivers are so you can know if it matches up with your skillset. Having that full understanding from the get-go will set you up for running a successful business.
As you speak with franchise owners be aware that every brand will also have advocates and detractors, strong-performers and poor-performers. Just because you hear a few negative comments doesn’t mean the brand isn’t a good fit for you. When speaking with a franchise owner, don’t be afraid to ask them about their specific KPI’s and how they rank within the system. With enough data points you should be able to differentiate between poor performance in an otherwise good system, and systematic issues with a brand.
Read the full article published in International Franchise Association by Chief Development Officer, Matthew Stanton by clicking here.