With January approaching quickly, our thoughts often turn to making resolutions for the upcoming year. When you think of resolutions, you probably think of the common ones that you can apply to your personal life. But, as a franchise owner, there are ways you can set up resolutions to grow your business. The best part about the following resolutions is that they are not likely to be tossed aside by February. Putting them in place now will position you for success throughout the year.
Opening a new business, whether it is a franchise or not, is a risk. One of the biggest questions you may have before buying a franchise is when it will become profitable. The start-up costs for new businesses are significant, which makes getting a return on your investment and sustained profitability one of the main goals for all new franchise owners.
Every franchisee enjoys the freedom and lifestyle that comes with business ownership, but let’s get real––at the end of the day, earning revenue is what drives us to succeed.
With this in mind, you’d think business experts would be clamoring to answer one of the most important questions on the minds of prospective franchise buyers:
Read moreHow long will it take before I can actually start making money?
According to the most recent report from the International Franchise Association, there are an estimated 759,236 franchise establishments operating in the United States as of 2018. As shown in the chart below, the number of successful franchise businesses has been steadily rising for years. 2018 saw the most franchises since before the 2008 recession.
Number of Franchise Establishments in the United States (2007-2018)
The steady rise of franchising in recent years is due at least in part to what it offers business owners in a somewhat unstable, unpredictable economy: a more stable path toward success. Unlike starting a business from scratch, franchise owners hit the ground running with a proven business model, typically fewer startup costs, and a strong system of support. In short, it’s generally less risky if good decisions are made.
If you’re interested in franchising and have done any amount of research into possible opportunities, you’re probably asking the same question just about every other would-be buyer asks:
“What makes a franchise successful?”
Before we tackle this question, it’s important to realize that success in any business endeavor is completely dependant on you, the business owner, first and foremost. Making your business a success is never a guarantee and demands diligence, patience and perseverance on the part of owners and their teams.
Related: A Step-by-Step Guide to Finding the Right Low-Cost Franchise
If you’re confident you can devote the time and energy to growing a business, let’s turn our attention to that central question of what makes a franchise successful. We’ve broken it down into five important ingredients:
One of the biggest advantages of buying a franchise instead of starting a business from scratch is the ability to see if the business model is actually working through the current franchisees. Just like any business, a franchise business model should have all the fundamentals in place:
You can be confident in a franchisor’s base business model when the company can point to multiple successful locations that all used the same process to get where they are today. Those that can clearly show that their franchise business model works in a variety of markets will have a huge advantage over businesses that only work in a specific area.
In addition to the business model, the other half of the equation is the return on investment it provides. Without the ability to give you earning power, there’s no point in moving forward with an opportunity, period.
When looking over your franchisor’s earning statements, make sure you’re looking at a minimum of 15 percent ROI based on the investment required.
At its core, all businesses are a collection of systems working in harmony to achieve a goal. To evaluate a franchisor’s ability to run operations smoothly and offer good support when it’s needed, pay extra close attention to the sections of your Franchise Disclosure Document (FDD) explaining how these systems operate.
Highlight these operational parts of the business, in particular, when looking through the FDD:
In addition to assessing the FDD, reach out to current franchise owners to discuss the areas mentioned above, and operation/support systems more broadly. Do they find these systems work for them? Did they have to change them significantly on their own? Taking the time to figure this out ahead of time can save you much more time later on and help you spot red flags before any dotted lines are signed.
Related: 4 Ways to Advertise Your New Franchise
Scientific research into franchisor/franchisee relationships has shown that cooperation,
information exchange, trust, and commitment are among the most important factors for successful long-term relationships.
“…franchisors and franchisees who cooperate and share useful and, in general, quality information trust more in their partners.”
Unlike going it alone with a business you’ve started yourself, franchising means building a relationship with your franchisor. While all business relationships sometimes bring tension at times, it’s important to be sure you can communicate problems to your franchisor and be confident in their ability to help you solve them. Growing pains will be inevitable, so it’s on you and the franchisor to develop a relationship that can overcome the challenges when they arise.
This can be more difficult to get a feel for during your research. Instead of relying on your FDD, ask existing franchisees for firsthand experiences about their relationship with the franchisor. Be sure to reach out to existing franchisees with any questions you might have before deciding on an opportunity.
Free Guide: What it’s Like to be a Groutsmith: a Q&A with 8 Franchise Owners
Market saturation is the degree to which the company has penetrated their particular market. Generally speaking, the less they’ve saturated their market, the more opportunities there are to grow.
This is a big reason many prospective franchisees decide to invest in smaller brands with fewer locations, rather than household names that have hundreds of locations all around the country. When looking for the right low-cost franchise opportunity, look for a brand that has big potential with a great product and service people need, but are still in the early stages of expanding.
Here’s how our franchise opportunity, The Groutsmith, offers a real-world example of all four ingredients for franchise success:
Here at The Groutsmith, we offer a unique low-cost franchising opportunity to those looking to hit the ground running with a proven franchise business model. Our training program is designed to transform anyone into a grout and tile specialist capable of delivering outstanding service and products to customers.
Interested in a low-cost franchise opportunity driven by a business model that has proven itself effective all over the country? Click here to learn how The Groutsmith differentiates itself from the competition or contact us today to start a conversation about starting a franchise of your very own.
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Looking to learn what it’s like to own a Groutsmith franchise? Get a first-hand look from eight franchisees in our free Q&A guide. Click below to download.
Whether you decide to partner with a franchisor with a company-wide franchise marketing strategy or one that gives franchisees the freedom to pursue their own ways to grow their business, it’s never been easier to make your business visible to those going online to look for the products and services you offer.
While a franchisor’s national marketing plan may include things like advertising campaigns, radio and television commercials, public relations and direct mail, there are far better ways franchisees can connect with people locally that only cost the time it takes you to set them up.
If you’re not an internet whiz, don’t worry! While there is some setup involved, many local marketing tools are designed to be easy and simple to use. This guide should help you go through the process step-by-step.
Professional from start to finish. The Groutsmith is the best service company I’ve ever had in my home.
Unbelievable - the loose tile floors in my living room are solid once again. Thank you again Groutsmith.