Owning a franchise is an attractive option for young entrepreneurs. You don’t have to start at the bottom and work your way up to the position you actually want. When you own a franchise, you start as the owner, just as you would if you opened a business independently. However, franchising as young entrepreneurs provides not only the training to launch the business. It also provides a support system of tools and technology to run the enterprise successfully.
A franchise offers a fast track to becoming a business owner and the possibility of building a multi-unit business. The pandemic forced many individuals to work from their homes and is now considered the norm. Because of this, young entrepreneurs may prefer options for a work-from-home franchise, such as helping people train their dogs or home renovation. Here are some components to consider when choosing the right franchise.
When you are investing in a franchise for the first time, be aware of the overhead expenses that come with the business model. Overhead expenses — administrative costs, office equipment, licenses, and permits — are necessary costs to run the business, but they don’t generate profits. When you have low overhead costs, a greater percentage of your expenses go into providing the product or service, which can be recouped with sales. While franchising as young entrepreneurs, look for a plan that directs most of your expenses to saleable aspects of the business.
The Elements of the Support System
Every franchisor should provide both initial training and ongoing support to run the business.
Initial training will include teaching the full operation of the business, setting up your administrative procedures, and marketing the launch of the business. The ongoing support should cover additional measures that contribute to growing the business — human resources help, customer communication methods, technology upgrades, growth opportunities, bidding advice, and networking. This holistic support approach is particularly crucial in educational franchises, where specialized knowledge and guidance are essential for success. Whether you’re considering tutoring services, language schools, or other types of educational franchises, a comprehensive support system ensures that franchisees can effectively navigate the unique challenges and opportunities within the education sector.
Look for support systems that work for you as opposed to you having to work for them. For example, if the franchise package includes a website, does the franchisor provide the content and manage the upgrades for you, or does that become your responsibility? Support systems should help franchisees succeed, not create more administrative work for the franchisee to have to manage.
Speak to Other Franchisees
Many franchisors include opportunities to speak with current franchisees. But if that offer isn’t obvious when you’re researching opportunities, ask for it. Better yet, ask to speak to someone with a similar path to yours. This could include a younger entrepreneur, a related background, similar upfront concerns, etc. Every franchisee has some great lessons learned or tips to share that can be helpful.
When you become a franchise owner, you are immediately part of a network of other franchisees in the company. While your focus can be on getting the business up and running at first, over time, you will appreciate the value of this experienced and exclusive professional network. Franchisees can be mentors and people to collaborate with for new ideas. Likewise, they are sources of experience if you are struggling with a certain aspect of growing the business.
Franchisees are also a key group if you choose to sell the franchise, as many are multi-unit operators or have plans to operate more locations.
You Are Buying the Lifestyle the Franchise Offers
Every franchise provides the opportunity to own your own business, but they do that in different ways. As you explore the options, think about the kind of lifestyle you want to have with this business. Do you want to work 80-hour weeks, or do you want weekends off? Do you want to always be a worker, or do you want to manage others who work for you?
With 3,000 franchises in the United States, you can choose the lifestyle you want from the beginning. When your work contributes to your enjoyment of life, your life will be much more rewarding. Reserve your judgment of a business until you find out how it works and what it can produce for you — financially and otherwise. Research the big-picture elements of what the franchise can deliver.
The Nuances of Generating Revenue
Obviously, you want to make money as a franchise owner. So, evaluate the financial part of the business model. This is crucial.
Here are two key things to consider when examining the revenue options as part of your franchise opportunity:
1. Diverse Income
Is the clientele of the business diversified? If the revenue includes both consumer and corporate customers, you have a diversified clientele. If you can find your own customers and be a subcontractor for larger projects, you have a diversified clientele within the same industry. Additionally, if the customer base is parents of children aged 6 to 9, you have a limited clientele. That’s not to say a limited clientele is a negative criterion. But, as we saw with the pandemic, it may increase your vulnerability financially.
2. Recurring Revenue
If the franchise model includes customers who will regularly order a product or consistently book a service, you will benefit from a recurring revenue stream. The effort you put into attracting the customer is rewarded as they repeatedly order from you. The franchisor should be able to give you an idea of the percentage of revenue that franchisees generate from recurring bookings.
Franchise Owners Come from Many Backgrounds
Franchising is an inclusive entrepreneurial opportunity available to people from many different backgrounds and experiences. Some franchisees started right out of college. Many left a high-paying career with a 401k and benefits to own a franchise and be in control of their lives. Others felt they were underemployed. A franchise gave them an opportunity to use their skills for their own financial benefit.
A franchise gives you an independent entrepreneurial experience without the risks of starting from scratch. In many aspects, it encompasses the very best part of business ownership.