I’m Applying as Franchisee; What Will I Do?

Oh yeah? So, you decided to explore your entrepreneurial spirit by going into Franchise but you don’t have any idea on how and where to start with. What will you do? In my article, Common Mistakes Committed by Franchisees that Lead to Failure published on April 20, 2009, we discussed some factors that lead to failure of doing business in the franchise industry. Now I believe that giving also some tips on the pre-operational activities on applying as Franchisee should reinforce my previous article. By the way, if you have not yet read the article that I mentioned, please click here so you’ll have an idea.

Here are the six (6) guidelines before completely going into Franchise:

Guideline Number 1. You should have enough capital.
Companies offering a franchise of their product or services are usually capital intensive though there companies who starts for as low as P5,000.00 up to Million of Pesos. For some companies who established their brand well, stay in the their respective industry for quite sometime, and has proven standard operating procedures that are efficient and profitable, merely offer their Franchise from P100, 000.00 and up to Million of Pesos depending on the size of their capital to operate the business, costs of equipment and utensils, area of the location, use of their trademark or brand, trainings and site assessment, initial inventory of stocks, and more. The cost of paying these is called Franchise Fee. While the supports, service and materials mentioned that get in exchange for a Franchise Fee is a Franchise Package. You should be ready also to deposit a Security Bond or Security Deposit depending on the requirement of the company that you are applying with. Do not expect that the amount will earn an interest. Another major cost that you will be incurring is the Royalty Fee where in most companies are charging roughly from 3 % up to 10% of your sales. Other companies do not have this fee but they require you to purchase all stocks from their Commissary or a combination of both.

Guideline Number 2. The business you are applying with, should much with your expertise, hobbies, or simply what you really wanted.
Well, I am not really saying that you should follow this because you can eventually learn the whole operation though you have no strong start up knowledge about the business. What I would like to emphasize is that the more the business is aligned with your area of discipline or hobby or expertise, the more it is likely to avoid failure.

Guideline Number 3. You should choose the right location for your franchise.
Some Franchisors have their own location to be offered to the franchise applicants and already site evaluated by their own team. They are just waiting for the right franchisee to exploit the area. To be sure however, you should pay a visit for the offered location and assess it for your self. Please read the article that I composed entitled 7 Guidelines On How To Assess Potential Location For Your Business for more details.
Other companies let you look your own location and they will be the one to assess it whether or not it is viable. Some good companies, share with you the result of the assessment, either negative or positive, give a recommendation but you will be the one to decide if you will pursue or not if you knew the area very well.

Guideline Number 4. You should shop around, talk to the franchisor and clear your concerns out.
Do not just jump into franchise with the company who offers too good to be true promises and fast ROI, or just because you have seen them on TV. Remember the qualities of a superior company wherein they have superior product and services and they are working out as customer oriented and most of all quality oriented establishment. You should shop around and find out the background of the company and how strong they are. Always clear up questions on your mind about their business. Ask for the operational supports the company can give you while you are running the business. Usually you will not be meeting the General Manager or the President of the company instead, the Franchise Manager or Franchise Officer will be the one to handle your concerns. You may attend activities such as Franchise Expo and Shows to have an initial knowledge on the offered services of your prospect Franchisor. This is one way to save time and money because you can meet them in just one place for a day visit.

Guideline Number 5. Choose the right internal business partner.
If you will be running your Franchise with a relative or a friend for example, you should take note on hat you have agreed upon and make a formal agreement to be signed by both parties. This is to make sure that whatever happens with your business, both of you will be responsible for it. It is also a way to be more committed in running the business and one will not leave the other just in case negative circumstances are inevitable.

Guideline Number 6. Find a way to learn the basics of the Accounting Principles.
This is strongly recommended because from the day you start inquiring the costs of Franchise and how long you can get the return of your investment, inventory of stocks and raw materials up to preparing your Profit and Loss analysis is where the knowledge on Accounting Principles applies. You can learn it by surfing the web, or look for a reliable source like books written by reliable authors and or even ask CPA Professionals. Sometimes asking for a simple advice from Professionals is free.

I believe these 6 guidelines will help you improve your start up plans if you really want to follow the path of Franchising. Along the way you will encounter pitfalls but do not give up easily. You can ask privileges and requests from your franchisors whenever you will encounter these circumstances, after all, you are considered as BUSINESS PARTNER by your Franchisor and YOU are their VALUED CUSTOMER as well.