Are you an entrepreneur thinking about buying a franchise? If you want to make a career by franchising a business, then you need to know the fundamental rules and process of doing it. You can find success if you are directed on the right path. Every franchisee has to abide by certain systematic steps to join a franchise network. Franchising is a great way to expand business models. Also, it is a successful path for entrepreneurs who want to carry the brand of an established concept. To get the right ideas, you can think about talking with a consultant. However, before you do so, you must have some general knowledge. Here is a set of rules you need to comply with strictly while franchising.
What rules should I keep in mind while franchising a business?
1. Get a Franchisor approved list of suppliers
You need to know the right suppliers to acquire the stock. Hence, get the supplier list approved by the Franchisor. If you think you can get better products at an affordable rate from the suppliers you know, you will be wrong. You need to provide the exact quality and quantity to retain the target market. You can even get a breach notice for not following the approved suppliers’ list. This list generally comes with the operation manuals.
2. Follow employment obligations
The Australian parliament has passed a “vulnerable workers law”. According to that, every company has to comply with the workplace legislation stipulated by the government. The franchisors can sue you and hold you accountable for failing the business model for not following the employment obligations. Most Australian franchisors are strict with employment regulations and expect their franchisees to allow them to monitor their compliance with the law.
3. Manage operations
You will receive an operation manual in which the required set of business operations will be mentioned. A franchisee has to oblige that set of rules to succeed in the business model. The manual generally provides information on -
- Service procedure
- Selection of the site
- Employee management guidance
- Use of branding
The mandated steps in the manual should be thoroughly incorporated into your business to attract the right audience. Generally, a franchisor has a niche market. You need to hold onto that market by following the exact model. The right use of branding, employee management, site selection, and procedure would manifest into the ultimate success.
4. License
When you are franchising a business, you need to get a license for doing that. You need to get an occupancy license in case you are operating from a fixed site. Franchisors often restrict the location preference. If you want to set the business in any of your preferred locations, then you have to get special permission from the franchisor.
5. Renewal and transfer provisions
A franchisor agreement generally ends within a certain time frame. When that agreement ends, it requires the franchisee to comply with the particular directions set by the franchisor. The franchisee needs to get a renewal in case he has not obliged all the mandated rules and regulations.
6. Payments
A franchisee needs to pay a certain amount to the franchisor within a given time frame. To operate the business in the right direction and to contribute to the marketing fund, a franchisee has to pay a fee.
Bottom Line
It is not a difficult process to operate a franchised business. You can easily go for franchising a business if you are ready to follow the things mentioned above. To make your journey successful, you should have multiple consultations. You must recognise and assess the probable risks. And, have to design plans to avoid and mitigate them.
Opening a franchise needs a substantial investment of capital which includes a hefty franchise fee along with continuing payments and marketing expenses. Every individual does not have access to that kind of cash says, Sean Michael Malatesta.
Are you looking to invest in a franchise? If yes, then you are at right place. Actually, finding the corporate loan to fund your franchise asset is challenging as you have to navigate the numerous options available. In this article, you will get the information how you can finance the purchase for a new franchise.
Let’s have a look:
Franchisor financing:
If you want to invest in a franchise, your conversation should be direct with the franchisors. You should ask them for recommendations. Actually, they can have the contract with lenders in order to approve a loan. In fact, they can also help in shortening the process and help you open sooner.
Also, some franchisors will endow debt financing themselves. You can check this in the franchise disclosure document. Ask the franchisor if they can help in financing. Lessening the upfront cost will leave you more dough to keep your franchise profitable and developing.
SBA loans:
Another option to consider while financing a franchise is Small Business Administration’s Loan program. These loans follow the similar model to old-style term loans from a bank or alternate lender.
SBA has reduced the risk to lenders by assuring a portion of the loan amount with lower interest rates and longer repayment terms. Hence, if you have a good credit score to apply for the loan, then you should certainly apply for the loan. However, keep in mind that prerequisite standards can be strict as well as the application process is long.
Commercial bank loans:
One more way to finance the purchase of your franchise is to apply for traditional term loan from a bank. Under this model, a bank or lender provide your lump sum of cash up front which you have to repay in monthly instalments over a specific period of time emphasis Sean Michael Malatesta.
While applying for the commercial loan to buy a franchise, the lender will review your corporate plan and credit history. Actually, the lender uses these documents to evaluate your creditworthiness. You can assume that the stronger your credit history, better the terms and interest rate for your term loan to finance a franchise.
Crowdfunding:
If no franchise financing option is available then obtaining finance may require some creativity. One of the latest and creative ways of financing franchise is through crowdfunding.
You have to set up and promote your own crowdfunding page. Moreover, you can look toward particular organizations that crowdfund for businesses and franchises. There are a lot of websites that crowdfund for specific industries and business types. Crowdfunding is the best option if you have a bad credit history and you are not satisfied with the loan products and interest rates for which you qualify.
Wrapping Up
Sean Michael Malatesta – A corporate leader has given the above franchise financing options to the entrepreneurs. With all these funding options, select a path that is right for you as well as your corporate. Be careful, thorough and resourceful with the funding plan and your franchise investment will definitely flourish.
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