The initial cost of one franchise can vary greatly from the next. How do you assess the cost properly? What should you look out for? What questions should you ask the franchisor with regards to upfront costs?

The upfront investment will vary according to the type of franchise, the location, the floorspace and the equipment required. It can also be tricky to identify what is included in the ‘starting from’ cost and it is well worth your time to ask the right questions and do your own research.

Here is a breakdown of the most common upfront costs:

Initial franchise fee

The franchise fee is typically a one-time entry fee giving you access to the franchise brand for the term of your agreement. It will also usually provide you with launch assistance as well as ongoing support and training. This fee will be influenced by how well established the brand is and how many inclusions there are.

Fit out fees

If a physical setting for the business is required, you will encounter upfront fit out fees. Franchise companies typically have brand guidelines when it comes to construction to ensure brand consistency across all locations.

These fit-out costs will vary depending on several factors and will typically include furniture, equipment, signage and other professional fees, like architects and builders.

It is worth checking who is responsible for the building contract, project management of the build and items such as council approvals.

Launch costs

The launch costs are the inevitable costs of starting a business, whether it is a franchise or a new start-up. They include recruitment, systems setup, licenses, initial marketing campaigns, training and legal and financial fees. Some of these may be included in the initial franchise fee.

The benefit of getting a business started with a franchisor is that they have launched new businesses many times before, which means they should be able to provide you with plenty of background info and modelling about upfront costs to assist you with your assessment.

This is valuable information you don’t have access to when starting a new business from scratch.

10 questions on upfront costs

Here are crucial questions you should ask the franchisor:

1. What’s included in the initial franchise fee?
2. What is the average cost to fit out a similar sized site?
3. Are there any other launch costs or certifications/registrations I should factor in?
4. Can I speak to some existing franchisees? Ask for a range of franchisees such as older, newest and a site close by your preferred location. A wider range will give you a better example of how the franchisor works with their franchisees and you can ask them about the various costs they encountered at the start.
5. Are there finance packages available? If so, what is the interest rate and how do you qualify?
6. What is a typical lease deposit? Also, is it usually a personal security over the lease or is a bank deposit required (ie. more money upfront but less personal risk)?
7. Is there a property search fee?
8. Does all the equipment need to be purchased through franchisor suppliers? If so, what rates are provided – is it better or worse than purchasing solo?
9. When are different fees payable? For example, it is a partial payment of the franchise fee and the remainder once a property is found?
10. What is the typical timeframe it takes for a franchisee to pay off their investment and start making a return? What is the quickest and longest time this has taken?

Getting a clear picture of the initial set-up costs is an important part of assessing a franchise opportunity as it’s a key component of calculating expected return on investment. Do your homework – it’s well worth it!

This story first appeared on our sister publication Inside Franchise Business

The post 10 cost-conscious questions to ask a franchisor appeared first on Inside Small Business.

It can be a powerful combination – but is it right for you? Not every family is suited to joint business ventures and it’s worth putting a lot of thought into it before moving forward because the wrong decision can do more than just crumble a business – it can do irreversible damage to family relationships.

Having observed hundreds of family units take on franchises of different sorts over the years, it’s clear that some are better set up for success than others. If you’re weighing up whether it could be right for you, here’s a few key questions to ask yourself before you go down the path of working with family:

Have you talked about it – a lot?

The best thing you can do before committing to a family business is to talk about the opportunity over and over (and over!) again from all different angles. When you do, observe. What comes out during these conversations and the reactions you see will be a key indicator of the future success of any business arrangement. Are your family members being reasonable and open-minded? Do they listen to different opinions? Are they open to sourcing outside advice? Are they positive and solution-orientated? Watch for any warning signs and negative behaviours.

Do you have strong relationships and strong shared family values?

This will give you a great base to build a business on. If a relationship is already rocky, going into business isn’t going to fix that. In fact, it’s likely to do the opposite. If your family also shares strong values and ethics it will give you the glue that will keep a business on track, even when challenges are faced.

Can you have open and trusting conversations?

This is critical. Communication is so important from the outset and continues to be an essential element for any successful business as it grows. Can you have open conversations with your family members already? If not, going into business together may not be a good idea. Avoiding difficult conversations is a sure-fire way to brew a nasty dispute and see cracks appear in your business.

Do those wanting to be involved have thick skins?

When it comes to family business, it’s not personal. It’s business. Sometimes, tough decisions will have to be made and they won’t always please every individual involved because they will be made for the greater good of the business. Those involved need to be able to put on a professional hat and act and react accordingly.

Do you have a good mix of skill sets?

This can put the business in a great position from the outset. When family members have similar skills sets it can be difficult to divide tasks and put clear boundaries on roles. It’s not essential, but it’s very useful and can save on costs if a diverse range of skills are present in the different family members involved.

Working with family can be a rewarding, positive and safe business experience and it clearly works for many – 95 per cent of our JUMP! Swim School franchises are owned by families, for example. Before you move forward though, do your due diligence, just like you would for any business venture. If you’re still feeling unsure, it can also be worth chatting to another family in a similar business who can share some honest insights about the pros, the cons and their secrets to success.

The post Working with family – will it work? appeared first on Inside Small Business.

Buying a franchise doesn’t have to mean making a full-time commitment as these days there are many franchises that can be run on a part-time basis or suit (and financially stack up) to a model that employs staff to manage and run it.

Here are five things to think about if you’re looking at franchises as a side hustle:

1. Find the right type of franchise. Some franchises suit the nature of the side hustle better than others. Is the franchise quite passive to run? Does it suit a semi-absentee arrangement? Are there only a few set hours each day where you need to be actively ‘on’, like a franchise that offers classes after school hours? Can you do most of the hours outside of the traditional 9 to 5 timeframe? Alternatively, is it the kind of business that will work well with a manager and staff in place? You’re looking for a franchise that requires lower time commitment during business hours, can operate with limited supervision, is not too risky to delegate to hired people and/or can generally be managed part-time. If you already have a position or business that takes up most of the 40-hour work week, you need something that fits around that and won’t add an average of more than 2-3 hours per day (or whatever you’re comfortable with) on top of that workload.
2. Think outside the square. The beauty of the franchise model is that it provides a proven model of success and doesn’t require the owner to build a brand from scratch (which can be very overwhelming and risky when you’re already committed to another job or business). You also don’t necessarily need to have worked in that industry before because you have the backing and the training from the franchisor. All of this means that you can think outside the square when considering your side hustle options and it can enable you to pursue an untapped passion or explore an industry that takes your interest. Finding a franchise that’s interesting to you will make your side business more appealing and make it easier to remain engaged with its operations even while you’re working your main job.
3. Crunch the numbers. When starting a franchise as a side hustle business, it’s very important to set a realistic income expectation and do the sums to ensure the opportunity is the right one. You need to ensure the earning potential is what you’d expect for the hours you’re going to have to personally invest in it. Some franchises also require more upfront investment than others, so be clear on your budget from the outset.
4. Could you partner up? One way to make a franchise endeavour more attractive as a side hustle could be to partner up to buy one. You could invest as a silent partner or split the responsibilities with one or more investors, reducing the day-to-day time commitments required.
5. Speak to someone who’s already doing it. A reputable franchisor should always be able to connect you with existing franchisees in a similar situation to yours so that you can speak to someone who is living the reality and ensure it’s the right decision for you. Ask for the contact details of a franchisee who operates their business as a side hustle and pick their brains on the ins and outs of the set-up.

Whether you’re just looking for something small to supplement your income or have dreams of building a bigger business with staff and a manager on board, a franchise opportunity could be the perfect side gig for you, so it’s worth including these opportunities in your side hustle research.

The post Can you have a franchise as a side hustle? appeared first on Inside Small Business.

What does a franchise conversion actually look like? Well, it’s when an independent business decides to rebrand itself and convert its operations and name to that of a franchise system in the same industry.

Why would you do this? Some are looking for ways to be less hands-on and better supported, while others want to find a path to faster growth or give a much-needed boost to a struggling business. A conversion is an interesting way to move into the franchise space because the business owner is already very familiar with the industry and there is less ‘ramp up’ time because the business is already generating cashflow in most cases.

Here are four questions to ask yourself if you’re considering converting your business to a franchise:

1. Could you I use the support?
   One of the main benefits of joining a franchise network is the support provided by the franchisor. If this is something you feel you’re really lacking as a business owner, then a conversion could be worth exploring further. As a franchisee, “head office” will take care of many of the crucial tasks involved with running a business so that you can focus on your strongest skills and the work you enjoy the most. There is usually also a shared marketing fund used to drive brand development and growth. Plus, for those business owners who have struggled to put systems in place, as a franchisee you are given the keys to an operating system that’s been tested over time by many operators before you.
2. Could the “new normal” affect my business in the future (and am I prepared for that)?
   If you managed your business through 2020, you would now have a sense of whether responding to these events was within you comfort zone and skills matrix. It’s likely that the “new normal” of doing business and unplanned interruptions will expected at some level. If you have a franchisor behind you, you know you’ll have support during these situations. The franchisor can assist with the required response, technology, marketing, operational protocols, regulation compliance and crisis management plans for these situations, which could be a big help, depending on your experience, previous success and comfort level with managing these scenarios.
3. Have I crunched the numbers?
   You need to be confident that the increased projected revenue, cost savings or profitability associated with being a franchisee will more than offset the fees and costs involved with undertaking the franchise conversion. The only way to know this for sure is to do your homework, ask for full cost breakdowns from the franchisor and crunch the numbers until you’re content.
4. Is the franchise model right for me?
   You also need to feel comfortable being part of a bigger team and not default to a “set in my ways” position. While individual franchisees still have a good amount of control over the way their business is run, the strength of the franchise model relies on service and brand consistency across the entire network and that does mean adhering to certain protocols, strategies and ways of operating.

If you are considering converting to a franchise then take the time to carefully weigh up the pros and cons. Evaluate the current position of your business, the costs and your personal preference as part of the decision-making process to ensure the choice you make is the right one for you and the future profitability of your business.

The post Could converting your business to a franchise take it to the next level? appeared first on Inside Small Business.