If you’re thinking about becoming an entrepreneur, but you’re not entirely certain what to expect in terms of the level of personal commitment, finances, plans, legal procedures, actions, etc. – you might want to explore becoming a franchisee. A franchisee is an individual who makes a contractual relationship with a business (franchisor) and is allowed to distribute the goods/ products and use the name and the brand of a particular franchise.
This relationship between the franchisee and the franchisor is often times considered to be the first step towards becoming a small-business owner. But some people choose to stay in this type of contractual relationship with the certain franchise their whole careers. There are myriad of different reasons why this happens and everyone has her or his own personal story. The important thing to remember is that becoming a franchisee can be a great start, in either way. Here are some essential things that you shouldn’t overlook before you begin to walk this path.
Do Your Research Thoroughly
Finding the best opportunity on the market that suits your level of knowledge, qualifications and market needs at the same time can be a bit challenging at times. That’s why you should thoroughly look into what is the right set of circumstances for your particular situation.
When we say your situation, we’re not only thinking here solely about you, in terms of your desires and possibilities. Drawing up a good business plan consists of multiple things, and only one of those is connected to your personal preferences. Others predominantly include the market – to put it rather simplistically: what sells and what doesn’t. It’s great to have certain aspirations and preferences, but you also need to properly assess the market since your ROI (return of investment) is directly tied to the revenues you’ll end up generating.
Our advice here would be to try to cleverly evaluate the needs of the market, and then decide what franchise to contact. That way you’ll definitely increase your chances of success.
Know The Costs In Advance
After the decision process has ended and you’ve explored the best options for you on the market, you should pay attention to a couple of things. The first task you’ll have to deal with is evaluating the costs. Knowing at least approximately what’s this whole adventure going to cost you is paramount. In case it turns out that you can’t cover the initial costs, you need to get back to the drawing board and do the first step again.
The things that you should know prior to making a contractual agreement with the franchisor is the franchise fee, for starters. This is the amount of money that you pay up front to the franchisor. So, before you embark on this journey, make sure to know exactly what’s the franchise cost in Australia, in order to know in advance if it fits your budget. Other than the franchise fee, you should also ask around if the equipment and supplies are going to be provided to you by the franchisor. In case you need to obtain those as well, you should calculate the costs once again.
Find the Suitable Real Estate
Once you’ve made sure that the costs are properly evaluated, it’s time to find a suitable location for your (shared) business.
In most cases, the franchisor will help you with the process of finding the best real estate. Often times they have certain requirements in regards to the square footage of the place, or how it’s supposed to be structured and positioned. Sometimes you’ll have to find the location that’s bigger than you initially thought because the franchisor asks there to be a huge parking lot, for instance. The point is that you’ll probably have to make this decision together with the franchisor, so don’t settle with the first location you personally think it would be the best option. Make sure to always communicate everything with the franchisor.
Carefully Look Into the Franchise Disclosure Document And the Franchise Agreement
Speaking of good communication, you’ll start off on the right foot with your franchisor and minimize the potential misunderstanding if you carefully look into the franchise disclosure document (FDD) and the franchise agreement. This is your chance to look into the specifics of the contract once again before it’s signed. The FDD should contain all the information about the initial fees and an estimated amount of money you need to give in advance.
In regards to the franchise agreement, this is the actual contract that you’ll sign with the franchise. It would be highly advisable to have a lawyer present here if you’re not familiar with all the legal terms or there are things in the contract that concern you in any way. Once you sign the franchise agreement, you’ll start operating under the set terms, and it would be best if you knew in advance what exactly it’s expected of you and what are your obligations.
Some franchisors offer training where you’ll get a chance to learn the ins and outs of the business. These sessions can be extremely helpful and they’re designed to make this transition go as smooths as possible.
The Bottom Line
Making a jump from being an employee to being an entrepreneur can often time be too overwhelming. That’s why you should consider becoming a franchisee first. Franchising can be good middle ground and a gateway to operating your own small business. But even if you don’t have such aspirations, there are still some ground rules and general advice about what you should focus on, before making the decision to become a franchisee.
Make sure to draw up a good plan and assess both your’s and market’s needs, before you decide to contact a certain franchise. On top of this, you should also get an approximation of the costs in advance, find the suitable piece of real estate, and carefully look into the franchise disclosure document (FDD), as well as the franchise agreement. Only this way you can be certain that you’ve made a good choice and found the perfect fit for your particular situation.
