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Franchising

3 Tips for Building an Investor-Ready Franchise Business

May 22, 2019


Franchisees usually benefit from a ready-made, tried-and-tested business model from the franchisor, which often includes a known brand, marketing strategy, and benefits associated with economies of scale when buying supplies and other relevant business inputs. 

That package of goodies, however, doesn’t come without a price tag – sometimes a hefty one, depending on the franchise brand you want to associate with. In addition to a franchise fee, which typically ranges from $20,000 to $50,000, franchisees often have to meet contractor and professional fees, as well as costs associated with signage and inventory. As with any other business, they also have to raise sufficient working capital to launch the business and keep it running until it breaks even.

Franchisees must always be on the lookout for funding opportunities to help with some of these costs. Because of the highly competitive nature of business funding, it pays to build a business that will not only get loan approvals from banks and other traditional lenders but also attract independent investors, including private equity firms that might have more favorable lending terms.

 

Editor’s note: Looking for financing for your business? Fill out the below questionnaire to have our vendor partners contact you with free information.

 

 

Here are a few tips to help you build an investor-friendly franchise business.

1. Cover all your legal bases.

When you’re looking to bring investors into your franchise business, remember that you’ll be adding another independent party, the investor, into an already complex web of interactions. To ensure things run smoothly, it’s crucial to take up the services of a franchise attorney from the get-go who will help with things like the franchise agreement, the franchise disclosure document, and issues of liability that often carry serious implications for franchise businesses.

Liability issues can weigh heavily on any business, …

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How To Know If Franchising Is Right For You

May 9, 2019


Before diving into the role or a franchisee, vet yourself to make sure you’re the right fit for this business model. Contemplate the following questions to see if you’re cut out for the franchise life.

Do I want to use an existing system and follow established standards?

If you’re a “my way or the highway” type of person, franchising isn’t for you. Franchisees operate by the playbook of the franchisor. The company gives new franchise partners its own proven business model so they have a foundation to work from. There’s a plan in place and it’s up to the franchisee to execute it. It’s like being a business owner with a head start.

The franchisor won’t micromanage you, but you have to play by the rules. Franchisees are still welcome to come up with new ideas, but the core of the business is set in stone. The company has gone through a lot of trial and error to solidify the existing model and ensure a consistent experience across all franchise locations.

Do I want to work with a team of experienced people who’ll guide me along the way?

Some people work better alone and there’s nothing wrong with that. Others work better in a team setting. Franchisees succeed because they work collectively with their franchisor, other franchisees and team members. This teamwork helps to clear hurdles and view problems from different perspectives.

In a franchisee role, you’ll constantly be communicating and collaborating with others. You’re not a one-man band – you’re playing in a symphony. It’s how you will learn and grow the business.

You’ll work with and talk to the franchisor frequently. Through this constant communication, you create trust and accountability. This two-way conversation lets you reach out when you need help or want new ideas for growing the …

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