Franchise a popular way to get into your own business

February 14, 2017

 

Across New Zealand there are thousands of people who’ve decided the time was right for them to ditch their boss and branch out into a franchise business venture of their own.  So what’s this franchising thing all about?  Quite a bit actually!

 

When you buy a franchise you are essentially buying a business system and the know-how to run the business, together with the product lines and ongoing support to run the business.  There’s lots of different franchise system business models to choose from (about 450 all up in New Zealand alone), but not every franchise business will be right for you.  Due diligence and research are key, and that starts with price, lifestyle, industry comparisons, professional advice, and a few good doses of realistic honesty, before you sign the dotted line.

 

Buy what you can afford and don’t over commit.  You need to ensure that you have enough capital to support the business in the start-up phase and the ongoing responsibilities associated with it such as staff wages, training, lease commitments, stock, marketing, regulatory consents etc.  And what is the real cost of the franchise – initial fees, set-up costs, royalties and working capital? What cut does the franchisor take of your turnover? Are you required to buy goods or products from the franchisor?

 

Lifestyle is also important.  Your new business franchise model must suit you and your family, and your social and weekend commitments.  If you’re regular weekend skiers, a retail business is likely going to impact on that.  Also, can you afford to absorb the lack of regular weekly income?  What are you passionate about and what excites you? Do you have the skills necessary to run the business and the personality to actually operate the business and sell the products or services.  Are you comfortable managing staff or being a team leader even if you’re not out front?

 

Compare similar franchise products or services and industries in the market.  Look for the market leaders and their business experience:  are they members of the national franchise organisation? How long has the franchise and its directors been involved in operating franchises?  What figures and disclosure information are available to back up turnover and growth predictions?  What is the future of the business? What training will you receive initially and how long is it? When, where, ongoing training, cost, level of ongoing support and group buying benefits …?

 

You will also need to seek legal and accounting advice to help you work through the nature, effect and implications of a franchise business system, and crunch the numbers before you sign any agreements (in fact you will be required to see a lawyer to even sign the agreement).  This advice can be invaluable in offering different perspectives and issues you perhaps hadn't considered earlier or an area you may have overlooked.

 

Analysis can be paralysis so, just like any other business purchase, once you’ve narrowed down your desired industry and price range, thoroughly done your research and weighed up all the pros and cons, there comes a time when you simply need to make a decision and go for it!

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