Franchise, is a good alternative for entrepreneurs who wanted to start their own business.
Consider starting a franchise business is literally less risky than starting a business from scratch particularly in nowadays ever-changing business conditions. Don’t get me wrong, any new business is risky, so does the franchise. All you need is to get an established franchise business as well as business plan, so that your success can be assured. I have shared here the 5 extremely useful tips for an ambitious you:
TIPS #1: Do Your Research
First, you should refer to Franchise Disclosure Document (FDD) and find out every single detail about the franchise company, its company background, leadership, litigation and bankruptcy history (if any), as well as your initial investment, equipment and operational requirements, and other obligations as a franchisee.
According to GE Consult’s franchise consultant Fred Wu, potential franchisees should find out their exact role and scope of work as an owner, potential return in the investment, payback period, inventory requirements, and chances on getting a loan approval for the franchise. Most importantly, seek for suggestions and comments from other franchisees and make sure you get big “YES” before signing on the dotted line. Remember, you are solely responsible for your own diligence.
TIPS #2: Strategic Location
Location is all that matter especially in the retail and F&B industry. It is always the toughest decision every franchisee will encounter when it comes to location, hence the market surveys, property related reports and experience will be able to lead you to make better decision. No doubt, as the decision maker, you will need to understand your target market and consumer behaviors while ensuring less rivalry within a certain radius (e.g. 5km) could be a good guideline for you to decide.
TIPS #3: Focus on Customer Service
A franchise business gives you a proven role model, modus operandi and a clear-cut marketing plan, but customer experience and impression is your call. So let’s train yourself to be a manager and team player while maintaining customer-centric staff that would go for extra mile to leave an extraordinary impression to your customers, such effort should be your priority.
TIPS #4: Consult a Specialist
Franchise agreement, financial statement as well as taxation issue is quite complex, to consult a lawyer specializing in franchise law to review your franchise agreement contracts is highly recommended. Also, you can consider hiring a franchise consultant who can assist you to validate both fixed and variable costs, including equipment purchase, inventory, operating costs, hiring costs and various tax considerations.
TIPS #5: Consider a Formal Business Structure
A formal business structure is critical to separate your personal assets from the business. Most franchisees prefer a LLC (Limited Liability Company, also known as PLT in Malaysia) or Pte Ltd (Private Limited Company, also known as Sdn Bhd in Malaysia) for favorable tax and shares arrangement. You should consider setting up a LLC rather than a sole proprietorship as franchisors would prefer to collaborate with local registered LLC, in general.
Let’s gear up, invest smart and good luck!