Business

February 16, 2023

By Entrepreneur Staff

Before you go from employee to boss, understand the financial benefits of buying a franchise.

For as long as you can remember, you've dreamed of business ownership. After narrowing down your list of potential franchise concepts, you're finally ready to transition from employee to boss.

Before you make the jump, spend some time running the numbers and understanding the financial benefits of buying a franchise.

The basics of franchising

Think of franchising it as a means of expanding a business that is already highly successful. Franchises succeed where new businesses fail for a number of reasons — the most important of which is that they are using proven business systems to market proven products or services.

That said, franchisors have made many mistakes and subsequent course corrections that will allow you to avoid costly errors during the crucial startup phase.

Franchises are systems that have been tested and refined. And gaining access to that system gives you, as a franchisee, the ability to start faster, reduce your initial investment and avoid mistakes.

Before you open your doors for business, most franchisors will provide initial training on every aspect of the business — from finding a site and build-out to hiring and training your team, serving your customers and managing your business. And for most franchisors, that training is just the start.

Cost benefits of franchising

As a franchisee, you'll know precisely what inventory to buy and what equipment to lease. And you'll probably get better prices due to the franchisor's ability to purchase in volume and pricing arrangements with suppliers.

You'll also learn how to promote your business without spending your time and money on advertising that doesn't work. You'll be able to control your startup costs and avoid mistakes that could cost tens of thousands of dollars. Furthermore, you'll benefit from the franchisor's experience in various ways that will help you reduce expenses while increasing revenue.

The franchisor company has already assumed many expenses that you as a franchisee will not have to undertake, such as:

• Registering its trademark
• Designing a logo
• Developing a branded website and consumer advertising materials
• Developing basic merchandising schemes
• Establishing supply chain relationships and negotiated discounts

Staying power

When it comes time for you to sell your business, a franchise may command a higher price. If you were thinking of purchasing a business and had your choice between a McDonald's and Joe's Burgers, if all other things (like profitability) were equal, which would you rather purchase?

Let's think about it: While buying a McDonald's doesn't guarantee that you would earn money, it's likely the handoff to a new owner will be easy. That's because McDonald's has the operational manuals and expertise to help you ensure a smooth transition. Plus, McDonald's patrons know what to expect out of any McDonald's restaurant, because McDonald's spends a great deal of time and effort ensuring this consistency. With Joe's Burgers, the minute Joe walks out the door, half his customers might follow him — and who is going to help in the transition process? Who will ensure quality control?

Most people would certainly prefer to buy a McDonald's, and thus its owner could command a higher selling price.

At the same time, ask yourself: Which of these units has the greatest potential? Joe's Burgers does, of course. Because you could turn Joe's Burgers into a chain—perhaps even a franchise chain — yourself, thus reaping far greater rewards.

Get started with The Franchisee Handbook

In The Franchisee Handbook, franchise expert Mark Siebert walks you through the process of vetting and buying a franchise, helps you ask the right questions of franchisors and yourself, and gives you the resources you need to decide if franchising is right for you. Siebert shows you how to do your homework before making what could be the greatest financial decision of your life. You will learn how to:

• Accurately assess the risks of buying a franchise
• Determine if a franchise is a good fit for your personal goals
• Research and vet potential franchise opportunities
• Create a startup plan that meets your business goals
• Prepare your franchise for success

Why dream about owning a franchise when you can take concrete steps to make it happen today? With The Franchisee Handbook as your guide, you have the power in your hands to start your own franchise journey right now.

Read the full article here:

Entrepreneur | How to Make Money in Franchising