Mumbai: Unlike starting an entirely new business, when one buys a franchise, it already has a business model and brand image that may be used to its advantage. This prevents one from investing time and risk into building the venture right from scratch, thus giving the new business owners a very good possibility of success.
Franchise businesses can come with a hefty upfront investment or a negligible one. The investment varies across sectors and brands, besides the locations. Major costs include franchise fees, royalties, initial investments, and marketing fees. The franchise fee can vary anywhere between 1 Lakh to 30 Lakh, or even more which is paid for the brand usage and the business model of the franchisor. Then, one must consider the cost for leasing, renovation, equipment, supplies, and setting up technology. Royalties comprise typically four per cent to 15 per cent of monthly earnings. Lastly, there is a certain percentage of marketing fees that one must pay.
Legal compliances:
Making a franchise agreement under the Indian Contract Act, 1872, which describes rights and responsibilities. Registration of the franchisor’s trademark has to be given under the Trade Marks Act of 1999. Lastly, the franchise shall be registered as a private limited company, corporation, or sole proprietorship under the Companies Act, 2013. All these legal steps make the franchise operate under the ambit of Indian business laws.
Getting started
Step 1: Pick an industry
Starting a business means an intensive commitment of resources — thus, one better make sure they are going into an industry they can work on day in and day out. Remember, at this stage, it should be passion over profit, for the more one is driven and engulfed with a venture, the likelier it will be to succeed.
Step 2: Research competition
Looking at franchise opportunities within the target locality could be helpful to gauge the amount of effort you will need and it can also be an indication of the success of the franchise. If there is competition ask whether the businesses are profitable and if there isn’t any, seek to know why is that.
Step 3: Cost Consideration
Becoming a franchisee might require a large financial commitment. Ensuring that one has the upfront funds as well as operational costs. Also, consider whether the business is profitable after royalties.
Step 4: Develop a Business Plan
An ideal next step after the opportunity has been identified is the creation of a business plan. Although this is supplied by many corporations upon acceptance, having an own to edit while working out a unique strategy and showing the franchisor how capable a partner is. A business plan should include market analysis, management plan, and customer service.
Step 5: Creation of Business Entity
Next up, establish a business entity. This means a business entity will shield a business owner from personal risk except, of course, for a sole proprietorship-so it’s smart to have an LLC or corporation set up. Most franchisors will have requirements regarding business entities, so it’s important to check with the company.
Step 6: Meet franchise licence requirements
This is the time when one needs to apply and go through the process of franchise licensing. This can be likened to a job application; Interviews are taken to ascertain whether one is qualified and capable. Once this exercise has been completed, a franchise licence agreement is signed.
Step 7: Find a location
The next step is to find a suitable location. Franchise rules set by the franchisor will likely dictate where a business can be located, and often Franchisors provide help to find a retail space. While this is happening, look for areas that have a good mix of foot traffic to affordable rent.
Step 8: Equipment ordering and human resource hiring
Now, it’s the time to order essential equipment and start interviewing employee candidates. Most of these are financial burdens that must be carried by the franchisees, although the parent company can provide assistance in the form of preferred vendors for equipment and templates for hiring. Automation processes like communication automation can save resources.
When all the above is done, one can open the doors. The parent company may also have contracted an advertisement campaign to announce its new location in town. The rest from here is left is for one to make decisions on how to manage and maintain a profitable business.
This article has been written by FranchiseBatao CEO and founder of Ashish Agrawal