What is Franchise and when it’s the time to turn your business into one

If you have a business or are thinking about opening one, most probably you have had many questions, some about building your own brand or choosing an existing one – and if expanding it or not in the case of an already established one. In this blog post we aim to give you some basic insights on franchising and on what you should take in consideration before opening one.

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According to IFA (International Franchise Association),

Franchising is simply a method for expanding a business and distributing goods and services through a licensing relationship.  In franchising, franchisors (a person or company that grants the license to a third party for the conducting of a business under their marks) not only specify the products and services that will be offered by the franchisees (a person or company who is granted the license to do business under the trademark and trade name by the franchisor), but also provide them with an operating system, brand and support. 

Even before getting deeper into the topic, it is important to underline that the business success also relies on administration and on having a well-established budget. It seems obvious to say that, but a lot of people fail in the beginning of the business because they rely on the franchise itself, thinking that the brand will do the big work. So, before taking this step, it is highly recommended to talk with other franchisees about their cost, earnings and the support they get. Basically, do a lot of research.

Money

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After that, think about how much you are willing to invest. In a franchise you will have extra costs and a high investment at the beginning (it’s when you should pay the franchise fee, a single payment only for the entry). So, if you are looking for fast initial income, forget it. Making money will always involve spending money – and franchisees know that. Have this in mind.

You will also have to pay royalties. This means that every month you will have to pay a percentage of your gross income. This varies, but it is something you will have to commit with. Up to the royalties you will also have to pay for marketing fees. This one can be tricky, since it depends on the franchise you are opening. Is it a very well-established brand or is it a new one? Go on the every detail of their marketing plan.

 

 Support

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Now, a franchise is a good option for some reasons related to support, especially on technology, marketing and training because your franchisor usually really cares about keeping the same standards. For the technology you can benefit a lot from it since it has been used every day for years and it is most expected to be up to date. And the marketing plans plus the brand’s name can really help to boost your business quickly when done correctly. And remember: you are paying for having this, so make use of it and get in touch with your franchisor if you need anything; most of them have a good communication system and will make you visits to best support you.

 

Rules

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As you might imagine, franchises work for some specific reasons too, and rules are one of them. If you are thinking about acquiring an existing brand, answer yourself if you are willing to follow their rules; they exist for a reason and a good one – why do you think that a McDonalds’ burger tastes the same in the USA and in Egypt? But with rules comes less freedom. Be prepared to have to purchase products directly from your franchisor or authorized suppliers and having limited creativity/ flexibility due strict contracts.

Final thoughts

A franchise is a business, so if that’s what you want after reading the information above, so it is for you. But if you are an entrepreneur, maybe this type of business won’t best meet your needs. In both cases, be ready to develop a business plan. Last but not least, ask yourself how much of your time you are willing to invest on it, because you will have to be very present; having your own business will consume a good part of your time and you will most probably forget what weekends and holidays mean sometimes. As someone wisely said once, the real boss actually is the one who works the most!