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There are several things that are imperative to franchise success. When you are deciding to take the leap and become a franchisee, include these important factors in your list of must-haves for your new business:

• A great product or service: The franchise should have something that consumers need or want. This can include products, like tasty coffee drinks for your morning routine, healthy smoothies for the new health craze or greetings cards for any occasion. Services that are in high demand, such as maid service for time-strapped individuals, home repair services and website design services for small businesses are also valuable. Basically, you need to make sure the franchise is offering something that people will buy.
• A workable concept: The business concept for the franchise should be one that is proven to work. If you have a concept that can be marketed well, it can even make up for a lesser product. Make sure the concept is clear and already developed, and ready to be implemented by new franchisees that will follow the model. Does the business concept care about its franchisees’ success? Make sure you can answer ‘yes’ to that question.
• Enthusiastic, qualified people: Ask yourself if the product and concept excite you. If you’re not excited about the prospect of running your own business with the product and concept, then you won’t be very successful in joining that particular franchise. Any good franchise will have exceptional people working for them — those that are willing to put in hard work and believe in what the company is selling and doing.
• Location, location, location: When determining where to place a franchise, it’s important to consider several factors. First, you will need good neighbors. This will strongly depend on what product or service you’re offering, but make sure you think about when people would frequent your business, and what other products or services might prompt them to pay you a visit. Second, it is important to be visible. When someone is driving or walking past your location, make sure the signage and storefront are visible without any strain. If the business is inconvenient to find, people won’t be apt to think of it. Thirdly, consider access to your business. You should be able to get to the business without having to go through too much trouble. Access includes easily being able to reach the entrance, ample parking space and an easy exit. The fourth consideration is figuring out what kind of business you are to consumers — a place to run errands, an impulse buy or a destination. If you are just a stop along a person’s daily errand route, you will want to be located near other places a person may run errands (e.g. a dry cleaners near the food market). If you are an impulse buy, you will want multiple ways to get to your business, so people can easily pull in and visit your business. If you are a destination, you can have less visibility and still get business.

These four basic principles are important to a good franchise. Any of the four can prove to be successful, but when you put all four points together, you’re in for an even more spectacular business!

You have a great business idea, and you’ve started your own successful business. What’s the next step? Business owners are asking themselves the question: should I franchise my business? You should put considerable amounts of time and energy into analysing how franchiseable your business is before taking the leap. However, we’ve listed several criteria you should definitely consider before becoming a franchisor.

•  Substantial Return on Investment: You need to make sure your financials are strong before franchising your business even becomes a consideration. You will need a minimum of 15% ROI to consider making your business a franchise. For example, if you made an initial investment of $100k, you would need at least $15,000 in profits a couple of years into the operation. Don’t forget to also consider that franchisees often pay a percentage of their profits to the franchisor, so the 15% will be harder for them to achieve.
• A Tried and Tested Business Model: You will need more than just a significant ROI in your business to consider franchising. It is important to test the concept at several locations before franchising. We would recommend testing at least three different locations with varying markets (and different employees, customers, demographics, etc). That way, you have a greater chance of offering a franchise that can be successful across the board, not just in your case.
• A Working Operational Model: Successful businesses generally have a working model in place that outlines how to run the business. It is important to have your working operational model written down so it can easily be taught and replicated by franchisees. This includes the way your business conducts marketing, recruiting, and training as well as operations, purchasing inventory and finances.
• Capital to Invest: Growing a business takes money, and so does franchising your business. While it requires less capital than expanding your business in other ways, you will still need money to launch and maintain your franchise. This includes money to advertise your franchise opportunity, legal fees, necessary software, marketing budget and staff to provide franchisees with support.
• A Long-Term Plan for Growth: Since franchise agreements generally span about 10 years, you need to be committed to sticking it out with your franchisees, for better or for worse. There may be some disagreements in a franchisor and franchisee’s relationship, but if you want to franchise your business, you need to make sure you keep the communication lines open whilst providing effective management. Commitment to these relationship is an important aspect to consider when franchising your business.

Before franchising your business, you should make sure that you can meet all of the criteria we listed above. But keep in mind that franchising is not the best way to grow every business. You should definitely get a professional opinion before determining whether or not your business is franchiseable. Check out Franchise Direct’s directory of Franchise Consultants for experts to contact.

If you’re considering starting your own business, you’ve probably been doing some research and tossing ideas around. You want to do something you love while making money, but you don’t want to fail.

Here are some reasons why joining a franchise might get you on the pathway to success faster than going at it alone.

1. You’ll feel supported. Joining a franchise often means you will get extensive training for your new business, as well as ongoing support from the head office of the franchise. This network of franchisees will allow you to find out of the system works or not, and learn from entrepreneurial franchisees that have gone before you. You will benefit not only from training and support, but also from helpful advice and best practices from fellow franchisees.
2. You’ll have a recognisable brand. When you join a franchise, you will very often gain the benefit of brand recognition. Although this may not be true for smaller franchise networks that are just starting up, any larger, established franchise will generally be well known. Consumers frequent franchises without knowing that there are individual people that own the business, and this branding can give you an advantage as you compete against similar businesses with no brand recognition.
3. You’ll benefit from a proven system. Franchises already have a system in place for operating a business. This includes an operations manual, a training system, ongoing support, marketing and stationery materials (and often, an advertising scheme that’s already in place) and often, recommended technology to help the franchise succeed. This also means that when you join a franchise, they will often show you how to have a successful grand opening, helping you determine what to do and how to spend your money to achieve the best results. Basically, the franchisor will tell you what you can do to get the best results in operations and marketing, and it takes the guesswork out of what to do to achieve results.
4. You’ll save money when purchasing for your franchise. Being part of a franchise gives you leverage when purchasing equipment and products for your new business — leverage that you wouldn’t have as an individual small business owner. Often, this purchasing power extends to marketing materials (e.g. signage), equipment, supplies and stock. You will receive cost savings through volume discounting when your franchisor has relationships with pre-approved vendors!
5. You’ll know how you’re doing. Good franchisors will have a way to benchmark performance and track best practices. That means you can compare your results with other franchisees and find out who are the top performers, how the franchise is doing overall and how other businesses with similar situations as yours are doing. It is important to have this information so you can gauge how well you are doing, and what you can do to make your business even more successful.

As an entrepreneur wanting to start your own business, consider all the options. Do some research to find out what markets are booming, and whether becoming a franchisee is for you. Whether or not you choose to start a franchise, or go out on your own, keep your head on straight and weigh all the factors!

Franchising is a good way to hedge your bet when starting a new business. You will most often have a tried and true concept that has proven itself successful in the past, and can be modeled to achieve similar results. However, it is always good to keep in mind that any business, including franchises, can still fail.

That’s why we’ve put together the top three most important pieces of financial advice that will help you plan for your future and your franchise in a practical, realistic way.

• Write a realistic business plan. When you are first starting your business, you may have heard from the franchisor that you can make sky high profits and that you have unlimited earning potential. While that may be true, make sure you are using the information you have at hand — from the franchisor but also from other franchisees, trends in the industry and what the economy looks like at that particular time — to set up a realistic business plan. Although it is easy to believe that you will achieve success quickly and make assumptions about that, that may not mirror how your business will actually perform. Make sure that when you are creating pro forma financial statements (project cash flow and income statements), you are really taking into consideration all the financial aspects of your franchise.
• Have more than enough capital on hand. It can be easy to make the mistake of having just enough capital to invest in your franchise, without taking into consideration the other initial investments they may have to make. Usually, a franchisor will let you know a range for how much capital you need to start the franchise. It can be easy to think that the best way to be prepared to invest in the franchise is to have the average of that range. But you should always plan to err on the high side of the range in terms of what kind of investment you have available. Undercapitalisation will lead to your business failing, so make sure you prepare on the high side, or 10-25% above that amount.
• Don’t spend too much, too soon. Once you begin investing in your franchise and you have that investment capital on hand, you may find yourself getting excited about spending money on your new business! There are exciting purchases ahead that may include leasing costs, construction, fixtures, furnishings, equipment, inventory, etc. But try not to spend too much at the outset. If you start spending like crazy at the beginning, you may find that you don’t have the funds for important purchases at the end. Stick to your business plan and look ahead to what you might need to spend money on in the future. And as always, keep money on hand for unexpected expenses that may crop up.

Financing is one of the most important aspects of franchising, and you can achieve success if you make sure you are realistic about your earning potential, are fully funded and spend wisely. Good luck!

One of the most important aspects of becoming a franchisee is to understand what kind of documents you are signing when you join the franchise. Most likely, there will be a contract that details what is expected of the franchisor as well as you, the franchisee. To ensure that you’re not legally signing yourself over to something you didn’t know about, we’ve prepared a handy guide to looking at a franchise agreement.

Keep in mind that it’s best if you  review the agreement with a solicitor that specialises in franchises, so you don’t miss anything!

• What does the franchise agreement cover? Make sure the franchise agreement is comprehensive, and that everything the franchisor has verbally agreed with you on is also included in the franchise agreement. This document should clearly lay out all your obligations to the franchisor and indicate the payments you need to make to the franchisor.
• What am I agreeing to pay? Understand what kind of fees the franchisor will be charging. Usually there is an initial fee, but also be on the lookout for ongoing fees. These ongoing fees could be fixed or varied (varied fees are generally dependent on the percentage of revenue). Fees based on revenue can be a minimum fee or based on performance targets, and it will help you manage your franchise’s finances as you build your business.
• Do I get an exclusive territory? If you have an exclusive territory, then find out exactly what area it covers (e.g. postcode or region) and if you are only able to make sales in that territory. If you do not have an exclusive, defined territory, then make sure to stipulate what kind of direct competition is there, and how that can be avoided.
• What kind of training and support do I get? Make sure the franchise agreement mentions what initial training and set-up support you will get, as well as the franchisor’s ongoing training and support obligations. This should mention what will be involved in the training, and it might be helpful to set out a timetable for the training as well.
• Do I need to buy anything from the franchisor? If your franchise requires products, make sure the franchise agreement mentions what you have to buy from the franchisor and/or a partnered supplier, or if you can choose to purchase products from a supplier of your own choice. Buying from the franchisor often means a discount, so ensure that is written in as well.
• What are the terms of the contract? How long is the initial term of the contract? When the contract expires, is it renewable? How much do you owe if you renew?
• What happens if you sell your franchise? Make sure the franchise agreement explains what happens if you were to sell your franchise business or (morbidly enough) pass away. Also, make sure the document details when/how the franchisor can terminate the relationship.

These are important things to remember when signing a franchise agreement. If you need a franchise solicitor’s help in looking it over, browse through Franchise Direct’s selection of Franchise Solicitors.