Whether you’re dreaming of being your own boss, wanting to travel the world, or just want to try something new, the world of franchise ownership is a lucrative option. Offering a proven business model and a steady stream of income, many people are choosing to become entrepreneurs and venture into the world of franchising.
Although the idea of becoming a franchisee may seem glamorous to some, there are a lot of unknowns that you need to consider before committing. One of the biggest decisions that you’ll need to make is selecting the right franchise marketing agency to help you navigate the process of establishing your business.
This guide will help you identify the key questions to ask yourself before making the decision to become a franchisee, along with some ideas about what to look for in an online marketing agency to help you get started.
How Much Does It Cost To Start Up?
One of the first questions that you’ll need to ask yourself is how much does it cost to start up? Simply put, the cost of starting a franchise business varies widely depending on where you choose to invest. The more you put in upfront, the more you’ll pay back, especially if you choose to franchise an already established brand. An intermediate option between completely bootstrapping and investing heavily is to invest a modest sum of money in a franchise that you’ll own part of. This way, you’ll achieve the benefits of the franchise model without fully committing financially to the franchise. Start-up costs for a one-location franchise are typically around $5,000 – $15,000, plus legal fees and licensing fees. To put this in perspective, this is comparable to what it costs to open a bar or restaurant in the United States. At the other end of the spectrum, you have multi-unit franchise businesses that can cost as much as $25,000 per unit, plus legal fees and licensing fees. The cost of opening a McDonald’s® restaurant ranges from $750,000 to $2,000,000, depending on where you choose to go for franchise financing.
Are There Any Upfront Barriers To Entering The Market?
Another important question that you need to ask is are there any upfront barriers to entering the market? Some industries, like medicine and law, have a lot of barriers to entry, as you need to go through extensive training to be able to practice your trade. Other industries, like manufacturing and construction, have very little to no upfront barriers to entry. In these cases, all that you need is a modest investment to get your business up and running. The downside to having little to no upfront barriers is that competition is typically fierce in these industries, and you may struggle to find enough customers to make it worth your while. McDonald’s, for example, faces stiff competition from other fast food chains, as do most restaurants and cafes in America.
How Much Does It Cost To Maintain The Business?
Once you’ve decided to franchise, you’ll need to ask yourself how much does it cost to maintain the business? Believe it or not, the cost of doing business is one of the major considerations that you need to make. After all, you’re not just investing in a brand, you’re also investing in people and infrastructure. As a general rule of thumb, you can expect to spend about 5% to 10% of your gross sales on business costs. Examples of expenses that you might consider include advertising, legal fees, accounting fees, and renovation costs. The good news is that you can likely expect to save a considerable amount of money by being a franchisee, as much as 30% to 50% of your income. While the savings might not seem significant at first, as you get used to the idea of being in business for yourself, you’ll realize that every dollar counts. If you’re looking for a new way to make money, you might want to consider taking out a franchise loan as a business owner.
How Much Money Does An Average Customer Spend?
If you’ve decided to franchise, you’ll also need to ask yourself how much money does an average customer spend? For many businesses, the average customer buys a small amount of merchandise each month. For example, a hair dresser might sell an average of 4-5 hair products per day. In these cases, the monthly income is usually around $3,000 to $5,000 per month, which is perfectly viable as a small business owner.
How Much Does It Cost To Acquire New Customers?
One of the questions that you’ll need to ask yourself is how much does it cost to acquire new customers? Believe it or not, marketing is a major expense that you’ll incur as a franchisee. In addition to paying for online marketing and social media advertising, you’ll also need to consider paying for radio spots, billboards, and magazine and newspaper ads. Marketing costs vary widely from $25,000 to $500,000+, depending on what methods you choose to use and your targeted audience. If you’re looking to acquire new customers through online marketing, you might want to consider doing business with a digital marketing agency that can help you design a strategy, track results, and optimize for maximum impact.
How Much Does It Cost To Retain Existing Customers?
After you’ve built a small audience, you’ll need to ask yourself how much does it cost to retain existing customers? Believe it or not, getting a customer to purchase a second or third item from you is much easier than getting them to purchase your first item. This is called customer retention, and it’s a common question amongst business owners. When it comes to marketing products and services to existing customers, the term multi-channel marketing comes to mind. Essentially, multi-channel marketing combines online and offline marketing into one, relying on multigenerational marketing, social media, and personal interaction to connect with consumers.
To get customers to purchase more items, you might want to consider rewarding them for their past purchases. Incentives like loyalty programs can help drive customer engagement and retention. Incentives can also help you track customers’ past activities, enabling you to better understand what resonates with them and what motivates them to continue doing business with you.
How Is My Industry Regulated?
Another important question that you need to ask is how is my industry regulated? Some industries, like medicine and law, have a lot of regulations that you need to follow, including getting special licenses and going through extensive training. In other industries, like construction and manufacturing, there aren’t a lot of regulations, but you still need to be mindful of what you’re doing and ensure that everything is done correctly. When you’re deciding whether or not to become a franchisee, you’ll need to consider how much regulation there is in your chosen industry.
How Expensive Is Labor In My Industry?
One of the biggest considerations that you need to make when deciding to franchise is how expensive is labor in my industry? Many industries, like healthcare and legal services, are plagued by high turnover rates, as employees expect to be compensated well for their labors. If you’re running a business that involves a lot of labor, like construction or manufacturing, you might want to consider avoiding franchise ownership unless you’re prepared to invest heavily in training. In these cases, you might want to consider looking into alternative business models, like partnerships or sole trader status.