Find and Start A Franchise In India
On Your Own
Vs
With Professional Help
And
What you ought to do compulsorily while one goes about starting a new business.
I am often thrown this question that in this age on information and so much information why would any entrepreneur need a franchise consultant and what does a experienced reputed consultant bring to the table to make it absolutely compulsory for anybody to take a well informed and time tested method of choosing and starting a new business.
Additionally how does one take up a good franchise business during these times when every franchisor is shouting over the top that their opportunity is the best that ever was!!!
a) Lets begin with the common myths or questions that any entrepreneur would have
1) Why should I take professional help to Buy A Franchise?
2) I know myself pretty well and who better suited than myself to choose a business?
3) I would end up paying my consultant a fee and hence my cost of acquisition of a new business becomes that much more higher?
4) I would be guided into a business that the consultant feels is better for me and it could be because they are getting paid more by the company which they refer to?
5) I will anyways get to know whatever I ought to know from the franchisor? Why should I use any third party or external consultants?
b) Let me list out to you the things you ought to do with or without professional help and then you could decide if you want to do this all by yourself. I also believe that my thoughts below would help you enormously in understanding what it takes to reach and start a reputed franchise business.
Understanding your Own self: The first step is to understand your own self and what you would be suitable doing. What are your long-term goals and what is the end result you seek while you start and own a new business.
Resource Deployment: After you have figured out ‘what you would want to do,’ & ‘what is suitable for you,’ the next thing is what are the resources you have. How much of liquid capital you have and how much would you want to borrow, if you come up to something that’s very exciting. How much time would you want to dedicate to the new business as you might have other things in life which demands some or more time.
Choice: A detailed franchise listing of franchise opportunities is available on various franchise websites and franchise magazines having franchise directory services. On the websites you could click on the filters of liquid capital, geography etc and select a few options and understand the franchise opportunity that is presently available. Every country has a couple of good sites that will filter down options that franchisees could choose from. How exhaustive the list is, how the options show up and how reputed the options are depend upon a lot of factors. A lot of franchise marketing, franchise advertisements, franchise brandings and franchise exhibitions are conducted to ensure that franchise companies reach out to entrepreneurs with their respective franchise offerings.
Research: Once you have chosen a few options, the next step is to research the options you have zeroed down upon. Speak to the concerned franchise officers and get down to understanding everything about the industry first, the company within the industry and then go deep into the companies operations, sales, teams and everything that effects its business. In the developed countries like US companies follow UFOC which makes it mandatory for them to have a set of pre defined disclosure norms that they need to follow for franchise sales. In other countries like India, where there is no set disclosure norms it is upto the franchisee to get and understand the information.
Selection Of Location: This is one of the most important factors in the success of the business you choose. For entrepreneurs who do not have fixed location preference, they have a larger choice of choosing the best locations for their franchise. This also widens their options for choosing a business rather than being limited to a specific property. For those who already have a property or have identified one, then you work the other way round as to what would suit them best vis-à-vis the location. It is important that you choose a location that you think would be best suited for you while keeping in mind it is not necessary that this matches with what the franchisor thinks. The franchisor would want to have a spread and reach and knows very well that some locations would do well and some not very well but you would not know that at the onset.
Numbers & Business Feasibility: it is very natural that the franchisor has shown you how you would walk your way to the Bank after you take up their franchise. It is important to correctly understand the numbers, be conservative on the revenues and not so conservative on expenses. Expenses are certain, revenues might not be. Hence a careful analysis on numbers & feasibility and the potential of the catchment or area where the franchise would operate needs to be done very realistically. Reputed franchisors provide P&L and an estimated project feasibility report to the franchisee once they get on to a more serious phase of discussion. It is very crucial that you understand every element of the business plan and numbers and then co-relate that with what you think you might be able to achieve.
Speaking To Existing Franchisees: It is very important that you speak to ‘randomly selected’ franchisees to begin with and thereafter with similar profiles as of yours within the franchisors network. This would give you real insight into what you would be able to achieve and give you a different perspective of what to expect. Also read whatever franchise material you can get your hands on. It would not be a bad idea to see the franchise brochures & franchise manuals & discuss standard operating procedures and adherences to these. How the franchise audits are conducted and how serious the franchisor is of his business. What is the franchise royalty is it justified, and a host of franchise operations. You might need approvals from the franchisors to see some of the documents mentioned above, but it always is a good idea to get your hands on as much information as possible.
Legal Agreement: Once you have decided to take up a franchise, you will have to understand the legal agreement and then draw up points in your interest and those not favouring you. Understand the consequences and then move forward with the sign up. The general point that we have a standard draft franchise agreement for all franchisees would not hold good in most cases and you would have a lot to be absolutely clear off whilst you sign on the dotted lines. Franchise your business with clear franchise documentations and systems is what most franchisors follow. Hence understanding these perfectly before you get into the business is very vital.
Starting A Franchise: Once you are done with the agreement, the next steps are to get started with preparing yourself with the start of the franchise. It is important you choose your vendors selectively and keeps your costs realistic whilst you start. It is often seen that franchisees get excited and go over budget in enthusiasm.It is very important that you start the business at the right costs and take the help of the franchisor and alongside take your own quotations from different suppliers. (Provided off course you have the freedom of choice from the franchisor). Another important factor is the choice of employees as it would be very critical to have the right team members. Hence a combination of all of the above factors would help you choose a successful business.
Now lets analyse how a reputed experience franchise consultant would be able to add value at all the above stages.
Understanding your Own self: There are various professional tools, which is used to understand entrepreneurs. A detailed counselling session over a couple of hours/days really brings a detailed analysis on the profile of the entrepreneur and what their goals, skills, resources, experience, background etc are. A lot of times we have realised that the prospect has never ever thought of things that we ask them and once they go through our detailed processes they start realizing their own potential and what their strengths and weaknesses are and then from there we help them choose areas that they should take and segments/industries which they should avoid. A lot of time prospective franchisees just go back and say that the time is not right for them to start a new business and come back to us much later when they are more ready to start off. This initial self-realization exercise marks a point clearly as to the journey ahead, the goal and what needs to be done to be ready for the marathon and what they would get during this entire activity.
Resource Deployment: A combination of how much time and capital you already have and how much more/less of either of these is needed. A good consultant will tell you how much you should stretch and from where you could get loans and other help. Also this stage would clearly mark what possibilities you could explore and what you cannot. It is very important to understand how much you could stretch, what could be the consequences if the business did not succeed, what is the back up plan and what are other factors that need to be considered which capital and time is committed.
Choice: Being part of the industry, a professional consultant would always know more. At times a lot of additional information which only they would have and which would take some more time to appear in the popular magazine or website. Their contacts and expertise would ensure that you get on to the good opportunities before any other ‘layman’ would. Also since they would have already worked with similar people like you, they would know exactly the kind of franchisees that you would be able to run successfully. It is also not so easy to get hands on the common brands and the top franchise options, as there is always a considerable demand for these opportunities. A seasoned professional could help you get a way into this and get you the franchise options of your choice, which otherwise you would have thought was not available or was not within your immediate reach.
Research: Similar companies in the same industry always give you a competitive analysis of their competition and in that case you get to understand the industry from different perspectives. Hence while we work with the 3 popular pizza franchise companies, we also know what each one of them would expect from an emerging market/particular market place and how they are doing in similar catchments. This provides a very different dimension to taking up either of those options. Hence one of them would be ideal for one prospect in one location and the other in other location. A lot of other critical research could be conducted and a very carefully evaluated option could be chosen. Also in countries where there are no proper disclosure norms it is imperative that proper research and background verification and checks are done.
Selection Of Location: Knowing the markets from a consumer perspective and understanding the catchment deeply enables a professional to understand a location very differently than what a prospective franchisee could. Infact a lot of times we are able to foresee a lot of inter-segment market feasibilities and bring that to the table to the advantage of the business relationship. Additionally there is this knowledge of what openings are present ‘today’ and in which areas that keeps changing regularly and when that coincides with what a particular franchisee seeks we call it a perfect ‘franchise marriage.’ Hence a professional can play a very vital role in helping you choose the right location for your business.
Numbers & Business Feasibility: A lot of people in India show their numbers to their auditors and chartered accountants. Infact while we work closely with entrepreneurs we also work closely with their financial consultants. These people are generally up to date and understand the numbers very well. I must compliment our chartered accountants for the quality of service they provide to their clients. With the understanding we have of the franchise domain and numbers and when that matches the CA’s/franchisees expectations, it makes it a very lethal combination going into the business. It becomes all the more important that you do the entire numbers very professionally if you do not have a business background. Also the most important contribution that a franchise consultant brings to the table is the track record of these numbers that the company is providing vis-à-vis what it generally does and what the industry standards are.
Speaking To Existing Franchisees: Where would you get the details of the existing franchisees, which franchisees would you speak to and why would the franchisee give you the information that you seek. Professional franchise consultants know exactly how to go about this exercise for you. Also the franchisee would be that much more comfortable in speaking his industry to somebody who understands this, than a new entrepreneur who might not completely get the hang of it. Hence a professional help plays a very important role in helping you understand what you need to understand from existing franchisees.
Legal Agreement: Which companies can negotiate on which points and how much can one stretch during the agreement sign up process. What are the major conflict areas that franchisors and franchisees generally disagree and how do you understand these and ensure that a strong foundation is laid in terms of defining a relationship with the franchisor? A professional franchise consultant would have seen a lot of franchisees suffering due to the wrong terms. He also understands specific nuances of different industries and where the franchisee is hit most. Also since the franchisor always has an upper hand in a franchise agreement there are many areas that they would be willing to consider in the interest of a healthy relationship, before the sign up and fees are transferred. It is therefore important to address these issues professionally before starting a new business and hence goes a long way in laying the foundation for a business, which you would do for times to come.
Starting A Franchise: A franchise consultant would have already worked closely with a lot of franchisees that have started off and would be able to provide a lot of references of third party suppliers and industry specialists who could be good alternatives to what the franchisor might recommend. We come across a lot of these franchisees who need options for who might be a good interior designer, architect, real estate agent or for that matter any body else. Since the franchise consultant has been part of the entire business start up process they should be able to guide you on deviations if any.
Hence an experienced reputed franchise consultant would always ensure that he stitches a good franchise business relationship, which is a win win for a franchisee and franchisor, only then, would they be regarded successful. Hence you have nothing to loose, while you work with one, what you gain could be invaluable.
And it is not only you who invests time and capital in acquiring a new franchise, what the franchise consultants puts in for you is his reputation and experience, and he would never ever want to be a part of a franchise marriage that failed.
Always never forget to check the track record of the franchise consultant and what his previous success stories have been.
Having said all of the above, I am sure that you would end up finding and starting a very successful franchise business if you followed all of the above carefully.
Please feel free to post your comments on the above or mail it directly to me on amit@sparkleminds.com.
Thanks & God Bless,
Amit Nahar
Founder & Principal Consultant
Sparkleminds Franchise CatalystsFranchise Bazar.
