Do you want to create a business and limit the risks associated with entrepreneurship? Opening a franchise is a particularly suitable solution that appeals to a growing number of designers. However, before becoming a franchisee, several steps are necessary to realize your franchise business project. Here are some tips and tricks to organize this phase of creation in the best conditions.
1/ Understand the franchise and specify your business start-up or takeover project
Firstly, it is essential to be clear about how franchising works. Opening a franchise offers advantages, which are accompanied by binding counterparties (particularly financial and marketing freedom).
Once the franchisor/franchisee relationship is better defined, it will be necessary to specify your project in order to know if it can be part of a franchise business creation.
What are your skills, desires, aspirations, budget and financing capacities? Ask yourself the right questions.
Then, you will also have to determine your weaknesses, your constraints and identify the brakes that could slow you down. In this way, you will be able to identify the framework of your franchise project and the missing resources (time, money, skills).
2/ Choosing the right sector of activity to open a franchised company
The franchise mode of collaboration is right for you. It’s an excellent start, but not enough. A wide range of choices is available to you. Are you more interested in a commercial or service franchise? Which sector of activity attracts you: catering, ready-to-wear, real estate, catering,…?
Becoming a franchisee opens the field of possibilities. Especially since most franchising activities do not require a particular degree.
Let yourself be carried away by your tastes, desires and past experiences. Be a keen market analyst and know how to spot trends. Having said that, it is essential to carefully study your catchment area, in order to know your target and the competition. Market research then becomes essential.
3/ Market research before opening a franchise
Market research is used to assess the potential of the catchment area and the strength of competition. Some franchising chains will offer you to take charge of this market research. Do not hesitate to do one on your side and compare it with this first market study, to ensure the objectivity of the results.
4/ Choosing a franchisor to open a franchise
At this stage, your business creation project in franchising is defined, or largely roughened, just like your budget.
After confronting them with the potential of the geographical area, you have identified an opportunity: an activity and a franchisor name may already arouse your interest.
Then it’s time to compare the franchise signs that match your project. You will observe that all honesty is not equal.
1/ Ask the franchisors for the DIP (pre-contractual information document). This will allow you to compare franchise agreements.
2/ Confront the different financial constraints imposed to purify the offers: entrance fees, royalties, personal contribution,…
3/ Get out of the administrative framework and investigate the franchise network: its dynamism, health and quality of support (training, advice, presence). A field survey of current franchisees is often very informative.
5/ Creating a forecast before opening a franchise
As in any business start-up or takeover project, the financial aspect is strategic. The realisation of your franchise opening project requires a forecast. Projected over 3 years, it will assess the needs and their evolutions and estimate the profitability of the business. It will compare the DIP information, your project and the financing needs/capacities.
Forecasting is a valuable ally when defending the project against the franchisor, but also before lenders (banks, associations,…).
It is common to be accompanied in the preparation of this document, given its importance and consequences.
6/ Finding financing to open a franchised company
Even before seeking financing to start a franchise business, you need to know your cash needs. The forecast will have allowed you to define, according to different hypotheses, the necessary resources.
It is generally advisable to work out your financing plan in the following order: personal contribution, financial aid, and only at the end banks, because money is the most expensive.
Find out more about support for entrepreneurs and entrepreneurs. Many organisations offer support and financial aid (loans of honour, guarantees, exemptions from charges, NACRE).
A business plan is appreciated at this stage, to present its franchise business plan.
7/ Find a location to start a franchise business
Even if contractualisation only occurs after the financial plan has been drawn up, it is common for the search for a location to start early, especially if the project is to open a franchise shop. Location remains a key factor in the success of any business.
Depending on the franchisors approached, you will be able to carry out your research independently or actively supported. In most cases, the franchise will conduct an implementation survey to identify the strengths and constraints of the address.
8/ Choosing the right status
The choice of the franchise company’s status is a “big paving stone”. Its consequences may extend beyond the strictly professional sphere and impact personal assets. Moreover, it is strongly advised to be accompanied in this decision.
Various criteria will determine the status: an activity alone or with partners, the amount of investments made,….
9/ Signing of the agreement with the franchisor
Once the file has been compiled and the DIP (and its clauses) has been carefully examined, it is time to sign the franchise agreement.
This franchise agreement is freely formulated. It is not subject to any distinctive rules other than common law rules and certain European and competition law regulations).
Have quality discussions with your franchisor to lighten up any areas of darkness.
Once again, the support of a professional is an appreciable security.
10/ Open up the franchise, finally!
After an average of 18 months, the franchising company begins its activity. If the study of the project has been carried out smoothly, the potential for activity must be revealed, more or less quickly.
It is at this very moment that franchise makes sense. Often preceded by a training period, the launch is accompanied by the franchisor. Throughout the life of the franchised company, the franchisor will guide and advise the franchisee. His presence will also enable him to ensure that his concept is respected.
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