For many entrepreneurs, the idea of running a franchise is a lot more appealing than starting a business from square one. Knowing you have a business system that already works, with advertising and marketing included, can save you years of time and give you peace of mind that you’re set up for success.
However, the system can’t do everything for you. If you are one of those entrepreneurs who want to open a franchise, it’s important you understand that doing your research and making informed business decisions will be imperative if you are wanting to grow. successful business in the long run.
Here’s what you need to consider as an entrepreneur before buying a franchise.
What is a Franchise?
Before we jump right into the factors to consider when opening a franchise, let’s go over the definition of what a franchise is.
A franchise is a type of business model business that lets franchisees sell services or products while using a franchisor’s business name. Usually, the franchisee also has access to proprietary business knowledge, processes, resources, and trademarks of the franchisor once they pay the franchisor an initial fee, licensing fees, and usually ongoing royalties.
Some feel that because franchise owners don’t come up with the original business concept, they are not “real entrepreneurs.” Of those people, some may even be asking, “Can an entrepreneur buy a franchise?” The answer is yes, of course! And this does not make you any less of an entrepreneur.
As a franchise owner, you need a lot of entrepreneurial spirit and skills to create a successful enterprise. You are still building and growing a business that will have to face the same challenges and opportunities as other new business entrepreneurs.
Why Do Entrepreneurs Franchise?
Choosing to become a franchise owner, whether you have existing businesses or not, is a big decision to make. One of the main reasons why entrepreneurs choose to buy a franchise company is the higher probability of success in the first couple of years of launching. A study by the Bureau of Labor Statistics funded by Fundera has said that over 20% of businesses fail in the first year. This is why entrepreneurs feel the pressure in those first formidable years of business ownership.
When starting from scratch, you’ll have to implement all processes on your own, on top of hiring employees, creating a marketing plan, devising an advertising strategy, and building brand recognition from scratch. With most franchises, many of these pieces are taken care of by the parent company. This doesn’t mean that you won’t be required to work hard, but franchising allows you to implement already proven strategies so you can avoid the trial and error period that new businesses go through.
Of course, this business model isn’t for everyone. But for many entrepreneurs who have enough capital, having an existing franchise team to support you with set-up advice, franchise details, marketing strategy, and advertising materials can help streamline operations and allow you to focus on other areas of your business.
It is no wonder many entrepreneurs lean towards franchise opportunities since the support of a franchisor can help ease some of that start-up pressure.
6 Things to Know When Opening a Franchise as an Entrepreneur
Now, let’s jump into the six different factors that a prospective franchisee should be aware of when choosing the right franchise opportunity for them.
1. Choose the Right Franchise Industry for You
You may be wondering, “Which business type is best for franchising?” This is a valid question you may be wondering about when starting to think about the perfect franchise for you.
Since the process of setting up a new business can be a lot of work, franchised or not, entrepreneurs who want to open a franchise need to do plenty of research before making that initial investment.
First, you’ll need to decide on a franchise industry segment and then the franchisor. There are many industry segments to consider. However, most companies offering franchise opportunities fall into the following industry segments:
- Health and Fitness
- Fast food
- Hotels and hospitality
- Senior Home care
To help you decide, consider your past work or volunteer experiences, previous schooling, passions, and overall values. By having a good understanding of these aspects of yourself, you’ll be able to decide which type of business or franchise will be right for you.
Once equipped with this knowledge, we recommend searching a franchise database to have a better idea of what franchise opportunities currently exist.
2. Do your Market Research
As a small business owner, you’ll be responsible for all initial franchise investments, finding a new location, and all pre-sale due diligence, such as paying a franchise fee and completing a franchise disclosure document before purchase. This means you should be confident that you’ll make a profit in the franchising business you choose.
As mentioned above, you’ll want to make sure you research not only the industry segment you are entering but also conduct market research on the profitability of your franchise choice. Not only will this help you determine profit possibility, but it can help with future marketing plans and with creating your business plan that will be used in the application process and for asking for loans. Here are some factors to consider in your market research.
First, put in some time to find the right neighborhood or area to open your business or operate from. You’ll want to determine if it is a growing market because if you choose an area that doesn’t have very many customers, your business may not prosper as you’d hoped in your local market.
Demographics & Psychographics
Beyond location, researching the demographics and psychographics of your target market will be imperative to know whether people will be interested in the type of product or service you’ll be offering.
- “Who is our ideal customer?”
- “What are their pain points?”
- “What are their wants?”
- “What current trends are affecting my target audience?”
To run a successful, you’ll need to know how you’ll differentiate yourself from your competitors to stand out and drive customers to your business and away from theirs. Look at your competitors and determine your Unique Selling Points in comparison to these other small businesses.
Conducting a PESTEL analysis is a great tactic for in-depth market research. PESTEL stands for: political, economic, social, technological, environmental, and legal. These are all factors that could affect your business’s sales and overall success.
Once you have a good understanding of the answers, you’ll be able to better comprehend your business’s profitability. Also, by doing this activity, you’ll be able to add it to your business plan for your franchise application and potential lenders for funding.
3. Benefits of Opening a Franchise
Buying a franchise and running it successfully can have many benefits for entrepreneurs.
Three of the main advantages of running a business franchise are the fulfillment it gives you as an entrepreneur owning a business you are passionate about. The growth potential of a franchise—especially when compared to the pay you would receive as an employee at a traditional salaried company. Finally, owning a successful franchise can give you access to a network of other franchise owners—who wouldn’t enjoy a built-in community of like-minded people!
Let’s go into more detail about these advantages:
Run your own business with purpose
When you open a franchise because you love the business you’re building, you’re more likely to see it grow into a success. At Nurse Next Door, the entrepreneurs who want to open a franchise with us are deeply committed to helping their senior customers stay as independent as possible while they age in place. Having that sense of purpose is one of the most rewarding aspects of owning a franchise business.
Nurse Next Door franchise partner Kiran Samran believes entrepreneurs should stay connected with their purpose, “Nurse Next Door has provided me with the ability to live my dream of serving with a purpose while also having a work-life balance. I am proud to be a Franchise Partner, and with now four territories, we are able to provide Happier Aging to even more Seniors!! We are making lives better every day, from taking care of our Bold Pink Team to providing high-quality care to our clients.”
Opportunity for profit
Franchising often requires less working capital and less risk than starting a business alone. Working with an experienced franchisor is like having an entire marketing, development, and sales support team at your fingertips for a fraction of the cost of hiring a team yourself. Good franchisors are happy to share their business model along with the knowledge and expertise you need to make your business money.
While many franchises have profit potential, some franchises are more profitable than others. Take home care, for example. The home care industry is growing rapidly in North America. Reports suggest that by 2030, one out of every five people in the US will be above the age of retirement.
While there are many business franchises out there, it’s becoming clear that for many, starting a home care services business is a winning strategy for entrepreneurs who want to open a franchise.
When you join a franchise, you’ll have access to a network of business coaches and other fellow franchise owners. This is a great way to overcome challenges you may face, celebrate your wins, and be surrounded by peers with the same interests and aspirations.
Before purchasing your franchise, ask the franchisor what events or networking opportunities they offer their franchisees. For example, at Nurse Next Door, we are all about community. To facilitate this, we hold annual and regional events that our franchise partners are invited to.
Watch this video to see behind the scenes at one of our regional conferences!
4. Owning a Franchise Can Have Challenges
While there are many benefits to owning a franchise, we also acknowledge that there are some challenges that may arise. Many of the challenges are not a hindrance to entrepreneurs but something they accept as part of the business. However, it is essential that you check in with yourself to make sure none are a dealbreaker for you.
Reduced Brand Control—The franchisor is in charge of the branding so that each franchise operates cohesively together. For an entrepreneur who likes to be creative, this could feel restrictive. Read the franchise agreement to see how much control you would have over the branding elements.
Extended Approval Process—You may be itching to get started right away to start turning a profit; however, when opening a franchise, you will first have to go through the application process, which can take time. Some entrepreneurs feel this takes away from the momentum and excitement of starting a new business.
Higher Overhead Costs—Since there are franchise fees, initial investment costs, marketing fees, and recurring royalties, the overhead costs will be higher. This is something to be aware of as an entrepreneur; however, when you weigh the costs versus benefits, this may not be a problem to some, as the benefits that a franchise parent company can offer will be worth the extra costs.
If some of these are a concern to you, we recommend speaking with your potential franchisor to gain greater insight into how they mitigate franchisee concerns.
5. What Makes a Successful Franchisee?
Many entrepreneurs decide to purchase a franchise for the built-in system that franchise companies offer while still being able to be their own boss. However, the success of a franchise isn’t guaranteed, and entrepreneurs should be aware of the costs and risks involved, along with what gives them a better chance of being successful franchise owners.
Here’s our advice for entrepreneurs who want to open a franchise:
Have leadership skills
Entrepreneurs must have good leadership skills to be able to make good business owners. Most likely, you’ll hire and train employees, and with that, you’ll need to know how to lead your team to success through strategic leadership.
Have enough capital
There is a cost to franchising, and as the owner, you need to have money and a budget to cover expenses like real estate costs, franchise fees, and opening inventory for at least the first six months of your franchise business—and ideally longer.
Provide an exceptional experience
Business franchises need to maintain a stellar reputation. Entrepreneurs who want to open a franchise company need to invest in high-quality experiences for their new customers. Ask for referrals and follow up with existing customers to ensure they are satisfied with your services.
6. Get to Know the Costs of Running a Franchise
The costs of running a franchise can vary greatly depending on the type of business.
For example, entrepreneurs who want to open a franchise will pay an initial business franchise fee ranging from $10,000 for a home enterprise to $5 million for a large hotel operation. It all depends on the type of franchise they are purchasing.
It is worthwhile to ask if the franchisor you are interested in partnering with has reduced entry fees for veterans or other groups. For example, Nurse Next Door likes to hire frontline workers and offers them a discount for purchasing a home healthcare franchise.
After the franchise has launched, there will be ongoing royalty fees and inventory costs to be aware of, these usually range between 4-8% of gross revenues. When you are going through the discovery process, ask to see a list of all the fees you may encounter as a franchise owner.
Many franchisors will have financing options to help entrepreneurs with getting their businesses up and running. Another thing Nurse Next Door does to help reduce the barrier of opening a franchise is offering financing options such as asking for a minimum amount down instead of the full upfront payment for the initial fees.
Curious about the costs of starting a home health care business?
Check out Nurse Next Door’s Investment Breakdown
If you take away anything from this article, it would be three things: take the time to research the types of franchises, understand what makes a successful franchise owner and check in with your motivations for owning a franchise. In the end, you want to choose the right franchise business for you!
And while we can’t speak to all franchise businesses, we can when it comes to home health care. We have been in the senior home care franchise business for 20 years. As a franchisee, when you work with Nurse Next Door, you get access to all of the expert company resources and the proven system you need to set you up for business success.
Our most successful franchisees strongly believe in our philosophy of Happier Aging and go the extra mile to ensure high-quality medical home care and non-medical home care services that help clients stay at home for longer. Contact us today to access your welcome package to see if Nurse Next Door is the right business for you!
Watch Our Discovery Video For More Information On
- How to start your own home care franchise
- Nurse Next Door’s unique 24/7 call center
- What type of training & support we provide for you