Tips to Open a Franchise

Opening a new business could be the right way to invest your savings, but it is a rather expensive and dangerous financial transaction.

To start a store, for example, you will need a lot of money, and it is necessary to work hard from six months to two years to raise awareness of the brand and create a successful and well-known business. The promotion and advertising costs are decidedly high and while the shop does not start, it is necessary to cover the management costs and the lack of revenue.

One way to limit these business risks is the formula of franchising, a solution that allows you to open a shop in affiliation, by exploiting the reputation of a brand already established on the market.

A franchise like allows you to open a commercial activity with a small risk and restrained investment. Plus, it offers logistical support, training and services to help maintain and grow your business.

So, without further ado, let’s see some tips to consider before opening a franchise.


Franchising: what it is and how it works

Franchising is a formula that allows you to open a new business, such as a shop selling clothing, without having to start from scratch with regard to the brand.

In short, a brand already known and active for years on the market grants the use of the brand to third parties, who can benefit from its reputation paying in exchange a monthly percentage on revenue. The business owner then becomes an affiliate, who sells his products on behalf of the brand, recognizing a percentage in return.

At the same time, it is not necessary to invest in brand awareness, since it is the main company that carries out advertising campaigns and brand sponsorships. Obviously, opening a franchise store means being subject to a series of constraints and limitations, since every company that grants its trademark in usufruct claims that certain specific criteria are respected. These are indications related to company policies, to ensure that the brand continues to be recognized and appreciated for the line chosen by the main company.


How to open a franchise

Before starting any franchise business, you need to design an accurate business plan. The fact that it is a franchise does not mean that there are no business risks, indeed. Often with this formula the profit margins are lower. Moreover it is not possible to have total freedom of action, for example on the advertising campaigns and the aesthetic and structural changes to the shop, therefore it is important to plan everything carefully.

First of all, we need to understand the budget necessary to open our franchise store, a fundamental aspect to verify the economic feasibility of the investment. Then, you have to start evaluating the various business possibilities, starting to think of a niche that can be profitable and a brand that offers a quality franchise and a good business potential. The choice of the brand is certainly the most delicate phase, which deserves time, attention and a thorough study of the sector.


How to choose the right franchise

Finding the right franchise is not an easy task, in fact you have to evaluate many aspects before making your decision and invest tens or hundreds of thousands of dollars in a new business.

In order to correctly select a franchise, it is necessary to analyze the costs required by the parent company, including the initial investment, the percentage related to the royalties for the use of the brand, the terms of renewal and withdrawal from the franchise contract.

It is also important to analyze some aspects related to the management of the service, such as the exclusivity of the commercial area, the assistance provided by the company, the possible training for the various franchisers, the duration and type of contract, the logistical support put available and obviously the constraints imposed by the main company on the management of the store. All these factors are used to make a precise assessment of each franchise.

The ideal in these cases is to organize a detailed table for each company and give a final evaluation to the franchising program. In this way, it will be much easier to choose the right one, finding among the best opportunities those that best fit their economic and family needs. Of course, we must make sure that the company that owns the franchise is a serious and well-established company like, with experience in the sector and a well-structured network of affiliates.


How much does it cost to open a franchise store?

The costs of a franchise are certainly the key aspects to take into account before opening a new store.

As we have seen, the franchise contract varies depending on the company and the type of services included, so we must always evaluate not only the single cost of the contract but the relationship between quality and price. Among the main costs to open a franchise store, we should consider the:

  • entrance fee
  • royalties
  • service fees
  • leases
  • management fees
  • start of the activity
  • initial supply orders
  • cost of employees

The entry fee is a cost that each company requires to its franchisee to take advantage of the trademark concession, a non-refundable payment whose amount is related to the reputation of the brand and its worldwide spread. In addition to the entrance fees, there are also the periodic royalties provided for the commercial use of the brand, which usually consist of a fixed percentage of the store turnover.

Then, you have to take into account the cost of the store design, the renovation of the business premises, the adjustment, any licenses and permits and the aesthetic and architectural layout. In addition to these costs, there are those necessary to execute the first order to replenish the store, a considerable investment that serves to fill the shelves and get into business.

Finally, it is also necessary to calculate the costs associated with the first few months of activity, since even if the brand is already known and known, it is not certain that the franchise store immediately becomes a success.

Therefore, it is important to have sufficient budget available to support the first few months of activity, calculating rental costs, the cost of employees and the investment necessary to promote the opening of the shop in the operating area.


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