The business model of franchising is said to be the perfect business opportunity. Franchising has been around since the medieval times—in a more archaic form. Back in the middle ages, local governments granted high church officials a license to assess taxes. Lords of the courts were given the right to hold markets and perform other business-related activities. Vendors in these markets paid a ‘royalty’ to the lords for protection. Fast forward to the 1800s and the first franchise for sale was developed. An entrepreneur named Mr. Issac Merritt Singer became the first franchisor.
Mr. Singer developed a sewing machine and a distribution method to deliver them at high volume. Partnering up with entrepreneurs interested in business opportunities, Singer charged a royalty fee and sold a license to sell his machines. The business people selling the Singer Sewing machines became the first franchise owners. This is the earliest instance of the modern franchise model. The model has progressed into brands like McDonald’s, DrPhoneFix, and BlueCoast.
What is Franchising?
Essentially, franchising is when an entrepreneur develops an idea. This idea stems from a market gap, invention, or modified service. This person creates a business around this idea. The business systems are perfected until the small business successful. Once the business is ready for expansion, with a flawless enterprise-schematic, this person becomes a franchisor. The franchisor develops a way selling their business idea—complete with training, support, and systems to a franchisee. A franchisee is proverbially handed the reins to the business by paying a franchise fee and royalty fees. In turn, they are permitted access to the brand and other luxuries of owning a franchise. Buying a franchise for sale is a common pathway to becoming a business owner. There are fewer risks and more stability.
Read on to find out more about what you should look for in a franchise for sale to find reputable franchise opportunities!
Five Signs the Franchise for Sale You’re Considering is a Good Fit For your Business Goals
1. Multiple Revenue Streams
Whether you’re thinking of opening as an independent business or buying a franchise for sale, the number one reason businesses fail is lack of cash flow. According to the SBA, 80% of all small businesses close their doors before the first five years. Initial investments can be steep, and many business owners don’t factor in unforeseen costs. This is the reason many choose to buy a franchise over building a business from ‘scratch.’ The research firm FranchiseGrade polled 12,000 franchise owners on their overall success. 78% of surveyed franchises reported they had fewer than 5% of their locations close. This is evidence of the stability franchise ownership can provide.
A franchise worth investment has already done the ‘dirty work.’ The franchisor should have developed multiple revenue streams. Instead of selling a single product or service, the business model capitalizes on various revenue streams—increasing cash flow. For example, DrPhoneFix widens opportunities through service and retail. Customers come in and have their phone repaired. They also have the convenience of buying any products they might need for their device while they’re already in the shop. This makes the cell phone repair franchise a one-stop-shop. By also offering a lifetime guarantee on repaired devices, DrPhoneFix establishes relationships with their customers, increasing the probability of repeat business.
The wider and more diverse possibilities for transaction, the higher your chances are at profiting. (Even niche product markets aim for varied revenue streams with strategic inventory management).
2. Strong Brand
Every year, billions of dollars go toward consumer education, advertising, and marketing. At the center of this propagation is brand. A brand informs the customer of the story behind the company and what they can expect—the experience behind the business. Many successful restaurant franchises rely heavily on branding. A mom-and-pop barbecue joint might have been successful by treating guests to great tasting barbecue in one town but would have no legitimacy in another town. Yet Dickey’s Barbecue Pit franchise has been treating guests all over the nation to great barbecue for over 30 years. Customers see the Dickey’s sign and resonate with that brand. They know the menu, flavors, and trust in the food they’ll be served. Franchise owners that join the largest barbecue chain in America have the advantage of brand loyalty.
A succinct and well-developed brand will tell your customers what to expect before they even walk into your shop.
3. Franchisor Support
The expertise and business experience of a franchisee will determine the level of franchisor support they will need. But the old expression, it’s better to have it and not need it than to need it and not have it is still very true. An entrepreneur can have tons of experience in small business, but the fact is they’ve never owned this particular business model. A franchisor has gone through the experience and tweaked operational systems. Systems like POS are already in place and perfected in franchising. With support come guidelines to every step of the process. On-site training with seasoned veterans will help new owners assimilate into a caring transition.
When you a buy a franchise for sale you should expect a recipe for success. The franchise concept should be polished. New franchise owners need training and support to open and on-going assistance to maintain their business. Think of franchising as a partnership. You will want your business partner to help you through the process of opening. Then once open, you will need access to their national marketing packages to stay open and boost profits.
4. Know the Market
The fastest growing franchises are propelled by the fastest growing markets. The fuel of this growth is disparity in the marketplace—a market gap. In 2008, when DrPhoneFix first began, the market was widening in smartphones. As more people began owning phones, the need for cell phone repair also grew. Today, more than 68% of the U.S. population owns a smartphone—driving the 3% growth rate the cell phone repair industry saw last year. Owning a franchise for sale in an expanding market is advantageous. When a market expands, there is more product diversity. This ultimately means more opportunity.
The tech industry is a good example of how expansion drives expenditures. With tech, consumer demand is matched with technology development. Each year more complex technology is premiered and sold. Knowing which sectors of the tech industry are recession resistant and which are not is also important. If the economy dips, you will want to position yourself in a business that will survive when customers are becoming more frugal. Being well versed in the marketplace will help you plan for the future.
This is the first half of market research you should know.
The second half is your consumer demographic. Once you know the franchise you are interested in has a strong foothold, you will need to research your local demographics. You will need to build customer profiles of the territory you want to open in. This is the first step of marketing. Knowing your customers’ needs, budget, and habits helps you meet your customers where they are, not the other way around.
Owning a franchise can be a challenging venture. Entrepreneurs are known as risk takers who enjoy calculated risk because the risk should be worth the reward. There are long days and sleepless nights. You will have to think creatively to jump over hurdles and if you’re proactive you can avoid them.
What happens if you buy a franchise for sale, then a year into opening construction begins, blocking convenient access to your storefront? All the visibility of your location suddenly disappears. You will have to use your abstract problem-solving skills to discover new ways of attracting customers.
The key to maintaining the energy to do this is passion. Without passion, many business owners burn out. Find an industry where you can explore what makes you happy.
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