Starting a franchise business can be a promising step for beginners eager to dive into the world of entrepreneurship. With a proven business model, the chances of success are higher compared to starting a business from scratch. However, there are several things to consider to ensure your franchise business runs successfully. This article will comprehensively discuss how to start a franchise business for beginners, from selecting the type of franchise to tips for successful operation.
Making Sense of Franchise Business
A franchise, or waralaba, is a business model where the brand owner (franchisor) grants permission to another party (franchisee) to operate a business using the existing name, system, and business model. In return, the franchisee pays a fee or royalties to the franchisor.
Benefits and Risks
Benefits:
- A proven business model
- Support from the franchisor
- Training and guidance
Risks:
- Substantial initial costs
- Dependence on the franchisor
- Limited control over the business
Choosing the Right Franchise
Choosing the right franchise is a crucial step in starting a franchise business. Here are some points to consider:
Interest and Skills
- Interest: Choose a franchise that aligns with what you enjoy. If you have an interest in the culinary field, a restaurant or cafe franchise might be a good choice.
- Skills: In addition to interest, your skills are also crucial. If you have expertise in management or marketing, you will find it easier to manage the franchise.
Market Factors
- Market Demand: Conduct research to understand the market demand for the product or service you will offer.
- Market Trends: Also, pay attention to market trends. Is the business you are choosing currently popular or not?
Competition
- Competitors: Who are your competitors? Is the market already saturated with the same type of franchise?
- Competitive Advantage: What can you offer that is different from your competitors? This could be in terms of price, quality, or service.
Target Consumers
- Demographics: Who will be your target consumers? Are they children, teenagers, or adults?
- Location: The business location also affects your target consumers. Ensure your location is strategic to attract consumers.
Capital Preparation
Prepare the initial capital needed, including franchise fees, location rent, and initial operational costs. Create a solid financial plan. Here are some points to consider in capital preparation:
1. Franchise Costs
- Franchise Fee: This is the initial cost paid to the brand owner (franchisor) to obtain the right to operate the business under that brand.
- Royalty Fee: Some franchisors require regular payments (usually monthly or annually) as a share of the revenue.
- Marketing Costs: Some franchisors also ask for contributions to joint marketing expenses.
2. Location Rent
- Rent Cost: Choose a strategic location and calculate the rental cost.
- Deposit: Typically, property owners require a deposit as a guarantee.
- Renovation Costs: If the location requires renovation or layout adjustments.
3. Initial Operations
- Inventory: Costs for initial stock of products or raw materials.
- Labor: Costs for recruiting and training employees.
- Utilities: Costs for electricity, water, internet, and others.
- Equipment: Costs for purchasing or leasing the necessary equipment.
4. Financial Planning
- Budgeting: Create a budget that covers all the above costs and add a contingency for emergencies or unexpected expenses.
- Funding Sources: Determine where the capital will come from, whether from personal savings, bank loans, or investors.
- Cash Flow: Create a cash flow projection to ensure the business can operate for at least 12-24 months ahead.
Legality and Contracts
Franchising is a business model that involves many agreements and regulations, from the right to use the brand, profit sharing, to the operational standards that must be followed. Therefore, understanding every detail of the franchise legality or contract is a must.
Before signing a contract, make sure you have checked important aspects such as the duration of the contract, the obligations of each party, and the rights and limitations granted by the franchisor. Also, verify if there are clauses that allow the franchisor to make unilateral changes, which could disadvantage you in the future.
Business Location
A strategic location not only helps increase your business's visibility but also makes it more accessible to customers, ultimately contributing to increased sales.
First, understand who your target market is. Are they students, office workers, or families? Then, choose a location that is frequently visited by that demographic. For example, if your target market is students, a location near schools or university campuses might be the right choice.
Also, consider accessibility factors. A location that is easily accessible by private vehicles or public transportation will be more attractive to customers. Consider the availability of parking facilities, as this can be a deciding factor for some customers in choosing whether to visit your business or not.
Another factor to consider is the competition around the location. While being in a busy area can be an advantage, too many competitors offering similar products or services can affect your sales potential.
Management and Operations
Management and operations are two main pillars that determine the success of a franchise business. As a franchisee, you must be able to manage effectively and efficiently, from resource management, employee scheduling, to quality control of products or services. This effectiveness and efficiency not only help you achieve sales targets but also maintain the quality standards set by the franchisor.
Following the systems and procedures established by the franchisor is key to ensuring that your business operates as expected. Franchisors usually have a tested business model and various standard operational procedures designed to maximize profits. By adhering to these rules and guidelines, you not only meet the franchisor's expectations but also build your business's reputation as a consistent and reliable entity.
Marketing Strategy
In the franchise business, marketing strategies play a crucial role in attracting more customers and retaining existing ones. Using tactics such as promotions and discounts can be a quick way to draw attention and increase sales volume in the short term.
Additionally, a loyalty program can be an effective long-term investment to build strong relationships with customers, making them more likely to return and make repeat purchases.
However, it's important to ensure that your marketing strategy aligns with the overall brand and vision of the franchise. This consistency not only strengthens the brand identity but also builds trust with customers.
Therefore, before launching a marketing campaign, discuss it first with the franchisor to ensure that all marketing elements, from the message to the design, comply with the franchise brand guidelines.
Read: 9 Instagram Marketing Strategies for Cafes and Restaurants
Evaluation and Development
Conduct regular evaluations to understand the progress of the business. If necessary, make adjustments or developments.
That's a review of how to start a franchise business for beginners. Starting a franchise business is promising, but it also requires careful preparation and management. By paying attention to the points above, your chances of success will be greater.
To help your business grow faster, use the super Opaper app, ready to assist with your business operations. From order management, finance, POS, inventory, and much more. What's more exciting, all Opaper features come without a monthly fee, just IDR 500,000 for a one-time payment.
So, download Opaper now or schedule a demo with our team!