7 Essential Factors to Consider Before Initiating a Franchise Business
A lot of people would be looking forward to embarking on a new career journey in 2021. It is possible that a lot of them may not be sure about which vertical they should switch to. Of course, there are many online and offline jobs to choose from in the contemporary world. It is noteworthy that the proportion of US workers switching between jobs is on the rise. In 2018, the percentage of US employees changing jobs one to five years rose to 51 percent. This is a 9 percent hike from the figures of 2017, making a claim evident. People have the right to prioritize their growth, and they should be keen on it. Besides, ever since technology completely took over every realm of life, the job market has become dynamic. But the real question is, why always look for a job? Why aren’t more people considering starting their franchise businesses? Why not transform the world by becoming entrepreneurs?
It may seem like a hyped idea at first, but there is no exaggeration here. Individuals can overhaul their fortunes by making the game-changing decision of investing in franchise ownership. Of course, it is a massive decision, and it needs a lot of deliberation and fact-based research. In addition to that, it requires taking into consideration a wide spectrum of underlying factors. With entrepreneurship, a less informed and hasty decision can be costly. Given that, assessing things well and critically is always the best-suited idea. What are the imperative factors that need to be prioritized before taking the final call on franchise ownership? This blog has all the answers that will be of great concern to all aspiring franchise owners. It sheds light on the list of points that an individual needs to test before he begins a franchise business.
Factors to take into consideration before beginning a franchise ownership
1. Brand Reputation
The most challenging and complicated of all decisions while starting franchise ownership is to decide the brand. There are so many brands to choose from that span across countless verticals. Further, in deciding on a single brand to go with, various factors influence the choice. Among all these determinants, the reputation of a given brand has paramount significance. Brand reputation is defined by how the consumers and the target market perceive a brand. If a brand does not have a positive value proposition among consumers, spending thousands of dollars, it not millions, for starting its franchise can be an unwise decision. However, spending a little extra on the franchise of a well-reputed brand can turn out to be the wisest investment ever. It is interesting to note that by following some franchise reputation insights, such as MaidPro, FASTSIGNS, Pinch a Penny, Two Men and a Truck, Payroll Vault and many others, are some of the brands with top-notch market reputations. Partnering with such brands that enjoy profound customer trust will be a profitable strategy. Henceforth, assessing a brand’s positioning in the market and its likability among consumers should be substantially mulling.
2. The core values of the brand
When a person begins to shortlist a few brands to embark on his first franchise ownership journey, he must compare the core values of the brands. Core values play a key role in building a strong brand reputation and a market proposition that attracts a massive consumer base. Given that, people planning to take up a franchise business’s ownership should evaluate the brand’s founding principles and operational values mindfully. To cite a small example, if a venture is into environmental sustainability, it will attract a more extensive customer base among the consumers that feel caring for the environment is salient for businesses. Talking about some brands that pay heed to sustainable practices in business, Nike and IKEA are common examples. Furthermore, these brands can cater to a massive target market, citing their environmental conscience as their unique selling point. Hence, running a quick check of a brand’s virtues and its compliance with them should be the first litmus test.
3. The unique selling proposition of potential brands
The next step in scrutinizing the possibilities of beginning a franchise business is to decipher the potential brands’ unique selling points. Determining and recognizing the unique selling points will help you make a prudent decision. You will be able to compare and evaluate to figure out which brand is the easiest to sell based on its unique selling points. For instance, Dominos has a brilliant USP presented to its customers in the form of a guarantee. Dominos says that if the pizza is not delivered to the customer in 30 minutes, it is for free. Indeed, people feel attracted to this USP, and they know that Dominos will be true to its commitment if it falters. Or, for that matter, they know that their favorite pizza will be delivered to their doorstep within 30 minutes. Thus, starting a Dominos franchise business can be a great idea for its USPs are appealing to the people.
4. The potential profitability
The profitability of franchise ownership can vary subject to many factors such as location and a host of other determinants. Still, getting a basic idea of the potential earnings and the prospective profitability will enable a person to draw a comparative analysis of the brands he is thinking about. It is possible in franchising that one brand which sells handsomely well in one part of the world does not sell much in other geographical locations. There may be considerable disparities in the revenues of a brand across various locations. For Instance, as illustrated by Statista, Starbucks’ revenue in the US was USD 16.73 billion. On the other hand, Starbucks’ revenue from China and the Asia Pacific in the same year was limited to USD 4.47 billion. This is for the simple reason that the market prospects for a premium coffee brand in the US are much brighter than in Asia or other developing countries. Hence, contemplating the demographics of an area well and then determining the profitability quotient is a wise thing to do.
5. Feasibility of territory exclusivity
To attain high-scale profitability, it is vital to explore the possibility of acquiring territorial exclusivity while beginning a franchise business. To explain in simple terms, territory exclusivity gives a franchisee a status of monopoly to sell a brand in a particular location. These monopoly rights will further directly impact the profitability of the business as it will create a competitor-free market. When an entrepreneur has territory exclusivity, he can maximize the brand’s consumer base in that specific location. Anyone who is planning to initiate franchise ownership, considering the feasibility of procuring a territory exclusivity is critical. This feature will play a key role in ascertaining the success of a franchise business.
6. Inferences of market survey
Before a person decides to associate with a brand, it is vital to comprehend the market comprehensively. For every business, be it big or small, scanning the market is a must. One needs to study the target market, purchasing patterns of consumers, and threats from competitors. Moreover, it is sensible to make an effort to figure out if the market for a given brand or product has grown or come down in recent fiscal years. This will require extensive research and interaction with pre-existing franchises to know their experience. Besides, a comparative analysis of different segments of franchises is an essential prerequisite too.
7. Strategic awareness of the latest trends
Given the rampant impacts of globalization, business dynamics and market patterns keep changing every day. Therefore, it is important that a person is aware of the latest trends that drive the franchise market. There is a significant possibility that the most promising franchise business options of 2020 may not have remained the same in 2021. In such a scenario, if a person invests in an idea that is no longer in vogue, he will have himself to hold responsible. A good businessman is first a critical thinker, and he backs his action with sufficient information. It is paramount to be aware of franchise businesses that will be successful in 2021 and beyond. It is significant to glance at a specific set of trends put forth by Franchise Direct. As per these trends, the most promising sectors for franchise businesses in 2021 are:
- Payroll & Workforce Management services
- Retail Franchises
- Franchise Catering to food servicing
- Franchises catering to home services
The other thing to take into consideration is to find out which franchises are earning the maximum profits. The top 100 hundred franchises of 2021, as per Franchise Direct, include McDonald’s, KFC, Burger King, Dominos, and so on. McDonald’s is the leader when it comes to the top franchises in 2021. Awareness around these parameters and drawing useful inferences out of trends can supplement informed decision-making.
To conclude, the opportunities for making handsome money in 2021 and beyond are countless. Among these, starting a franchise business can be a game-changing decision concerning fortunes and legacy. However, this is a life-altering decision to make for switching to franchise ownership from a high-paid secure job. Therefore, this decision should not be based on intuitions or pieces of advice from others. This is a critical choice to make, and it requires a person to do his homework well. Starting up a franchise business requires comprehensive research and attention to detail. It is equally important to perform an in-depth evaluation of the reputation, USPs, and virtues of the brands a person is assessing. Lastly, people should be aware of the reality that bailing themselves out of a wrong franchise decision can be very expensive.