How to evaluate a franchise?


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How to evaluate a franchise?

  1. 1. How to Evaluate a Franchise by Mr Arpit Sharma Director SevenSeas Spas Page 1
  2. 2. Striving for new goals is a motivating way to get yourself out of the current economic funk. For many people, these goals include the desire to start their own business and become the master of their destiny, and franchising can fit very well into that picture. Mr Arpit Sharma Page 2
  3. 3. CHOOSING YOUR FRANCHISE ? There are four main ingredients found in each business... •The product or service that is delivered to its customers. •What is the demand for the product •Growth in the Industry •What competition exists and why is this franchise a good choice? •Business Lifecycle if any? •Seasonality if any? •The location that the business occupies. •The amount of capital that has to be invested or borrowed by the venture. •The management team that runs the company--You! Page 3
  4. 4. Is Franchise Ownership right for you? If you have any kind of entrepreneurial streak in you, the allure of owning a franchise can be great . Top 10 Reasons To Buy a Franchise Here's how franchises can offer you a jumpstart toward owning your own business. • Established Brand and Customer Base. • Marketing Support. • Reputable Suppliers. • Business Support. • Training. • Financial Assistance.. • Access to Proprietary Methods. • Ongoing Research and Development, • The Boss is You. • Reduced Risk. Page 4
  5. 5. Established Brand and Customer Base. Any good franchise company has developed a method of doing businessthat works well and produces successful results. Even better, they're required to provide you with a great deal of information in their required disclosures so you can investigate and verify the results with existing franchisees prior to making your final decision Marketing Support : he franchise company has marketing support to provide you with proven tools and strategies for attracting and retaining customers. Usually, the staff helps you develop the actual marketing plans and budgets for your grand opening as well as your ongoing efforts to market your business effectively. Reputable Suppliers: Franchisors often have established relationships with suppliers for all the materials franchisees need. Page 5
  6. 6. •Business Support: There's a saying in franchising: "You're in business for yourself, but not by yourself" because you have a network of support. Training : A good franchise company has training programs designed to bring you up to speed on the most successful methods to run the business. They should also have reference materials to assist you in dealing with whatever comes up while you're running your business. Some of the better (and more expensive) franchise operations offer management and technical training. •Financial Assistance: Some franchisors provide loans and other assistance to help franchisees. •Access to Proprietary Methods: There's no need to reinvent the wheel as franchisees get access to all the trade secrets. Page 6
  7. 7. • Ongoing Research and Development: New Products. Franchisees can stick to improving their operations and let the franchisor spend the time and money developing new products. The Boss is You: As with owning any business that you own, you are in control of your destiny. • Reduced Risk: For all of these reasons, starting a franchise of an established brand often has less risk than starting a business from nothing. Page 7
  8. 8. Here are the top 5 key points we think you should consider before you buy into any franchise. • 1.Cost: Since the costs of franchises can run from a few Lacs, to millions, the very first thing you should do is identify which opportunities you can afford. • 2. Reputation :Ideally, you'd like to look for a business that has a proven track record, over a number of years, and a loyal client base. • 3. Legality :Franchise businesses are governed by very specific laws, in every country around the world. If you are even a little bit concerned about the contract, have a lawyer go over it • 4. Royalties :Make sure that they are not so high that they will cripple your business. Ideally a franchise royalty should be around 15-20% excluding promotions. Page 8
  9. 9. How to find the Right Franchise? • First, you must believe in the product or service that the franchise network delivers. Is the niche stable, expanding, long-term, saturated?? • Next you must verify the industry's future. What do the trade papers predict? • Think about what you're seeking from a franchise. Part time or full time? What type of business would you enjoy? Consider your hobbies and passions. • Figure out your financial resources. What are your financial goals for the business? • What experiences and skills do you bring to the table? Do you have administrative skills or flair for sales? Then retail franchise concepts can be a good idea. Page 9
  10. 10. 5 Questions to ask a Franchisor ? • What is the Mission of the Company? • How Big Is The Market? The Franchisor should have a good handle on the available market for the product or service that you will be offering as a Franchisee. • Differentiation from competition? The Franchisor should have a good understanding about the competition, and differentiation should be immediately realized. • What Are the Franchisor’s Growth Plans? You may think that a Franchisor’s growth plans are not important to you once you become a Franchisee. However, there are a number of factors that illustrate that a Franchisor that has continuing growth plans will increase the value of your investment. • Professional Support ? A Franchisor should support you from the moment you sign the contract to the time your project open. And the support continues during operation through continuous monitoring. Page 10
  11. 11. Thank you Page 11