Tips for starting a franchise business

FAQs: March 3, 2020

The best tips for starting a franchise business

Are you thinking about starting your own business or buying a franchise?

Operating a franchise can be a great way to get started in business but it’s important to do your research before you commit. There are more than 1,000 franchised brands in Australia and not all of them will be the right fit for your circumstances. 

We’ve compiled a list of tips for starting a franchise business to help you do your research and find the right franchise brand for you.

Researching franchises the smart way

It’s easy to get information overload when researching the franchise industry. There are so many choices out there – from Quick Service Restaurants (like us) to garden maintenance businesses, yoga studios to wholesale products. Trying to figure out which is the best option for you can feel overwhelming. 

But, these tips will steer you in the right direction.

  • Talk to those at the coalface 

Any professional franchisor will encourage you to talk to their existing franchisees to get a sense for how they run and if they’re a good fit. Talking to franchisees gives you the inside scoop on what it’s really like to own a business with that particular brand. Questions to ask before you invest in a franchise could include:

    • What does a typical day look like for you?
    • How long have you been a franchisee with this brand? 
    • What investment did you put in initially? 
    • What has your return on that investment been so far? 
    • How much support do they get from the franchisor?
    • Are they happy with the franchisor?
    • What are the plans for the brand in the future? 
    • How much does your business support your local community?
    • Do you own multiple sites? How does that work for you? What are the benefits? 
    • What is your greatest challenge at the moment? What are your plans to overcome it? 
    • What is your greatest win at the moment? How do you plan to leverage that success in the future? 
    • What are you most excited about for your business in the future? 
  • Get advice

Buying a franchise business is a significant monetary investment. It’s vital that you get advice from a range of professionals. Seek legal, financial and business advice for guidance across a range of areas.

  • Research the location

Some franchise opportunities will work better in particular locations. Do your research on the region, the local area and the potential customer base. Research your competitors in the area, too. Is there sufficient business for your franchise business to succeed?

  • Be aware of the workload

Don’t think you can buy a franchise and simply sit back and watch the profits come in. Be prepared to work in the business as well as on it. As an owner-operator, you’ll see what’s happening with your team, make decisions on the go and be responsive to situations. Working with your team will motivate them and allow you to showcase best practice which, in turn, will lead to a more successful business.

4 questions to ask before you invest in a franchise

Buying a franchise is a major decision. There are probably 101 questions you need to ask before you invest in a franchise, but here are our top four to guarantee you understand exactly what you’re getting into.  

  • What is the brand’s future strategy? 

Even more important than knowing the history of the brand, is understanding what the corporate strategy is for the future. Is it a strategy that excites you? Are you energised about being part of making that strategy happen? Does it align to your own personal values? This is one of the critical elements of knowing what to look for in a franchise opportunity and whether it’ll be the right fit for you. 

  • What do the financials look like? 

If you’re looking at buying an existing franchise business, certain financial information should be made available to you before you decide to buy. Compare the figures you receive with what the franchisor thinks the benchmarks should be. Ask to see:

  • Profit and loss statements
  • Sales history
  • Employee wage percentages
  • Costs

If it’s a new franchise site you’re looking start, you should do due diligence on the following types of information:

  • Demographics
  • Traffic count
  • Competitors in the area

Use the information to build a sales profile, work out your benchmark costs and calculate your return on investment (ROI) by comparing your profit levels against your planned investment.

  • What are all the costs? 

Find out all the costs involved in starting and running your planned franchise business. The more information you have, the more accurately you can forecast and calculate your ROI. The franchisor you choose needs to share these details with you before you plan to purchase. Costs can include:

    • New franchise fees
    • Storefront/Site build costs 
    • Ongoing fees
    • Average costs of goods sold (for a site similar to the one you’re planning, or for an existing site)
    • Average wage costs (for a site similar to the one you’re planning, or for an existing site)
    • Other costs such as refurbishment 
  • Do you receive support and training? 

Is there initial training and ongoing support in running your business or are you just left to struggle on your own? Professional franchisors will offer initial training to get you started and then ongoing support to help you make your business a success. For example, here at Red Rooster, our franchisees receive an initial 10-week training induction program to ensure they’re set up and given the best chance of success before they open the doors of their first store.

Bonus 2 questions to ask before you invest in a franchise

As well as asking questions of the franchisor and franchisees, you need to be honest with yourself about whether the franchise is the right brand for you.

  • Are you passionate about this brand? 

You’ll be spending many hours working in the business over the term of your franchise agreement. Do your values, interests and passions align with this brand and can you see yourself maintaining your enthusiasm over time? 

  • Are you prepared to follow established systems and processes? 

Being part of a franchise brand means you must follow the systems and processes set down by your franchisor. This is necessary for maintaining the brand’s quality and image and that means you need to stick with the established system. If you’d rather do your own thing, a retailer-retailer franchise business model may not be the right fit for you. 

Is Red Rooster the franchise brand for you?

This list of what to know before buying a franchise is just a starting point for your research. Talking to those franchisors you could see yourself working with is the next step. 

Want to dive deeper into becoming a Red Rooster franchisee? 

Get in touch today! 

Our Franchising Team is here to help: