Articles

Useful tips for cutting costs when franchising

Most owners of successful small businesses dream of growing and expanding nationally or globally. Opening a franchise with your brand requires shorter time and lower budget than opening a store of your own. If you are considering franchising but you think it might be too expensive for you right now, this article will give you a few ideas that will help you decrease the costs for franchising and make it possible.

The costs of turning into a franchise can be reduced.

The costs of turning into a franchise can be reduced.

Capital is one of the biggest issues a business owner who wants to franchise could face. Start-up costs are typically covered by the franchisee, but franchisors are still responsible for developing their brands and growing their units.  

The costs of turning a business into a franchise vary depending on the essence of the business. Some businesses require heavy investment in inventory and facility while for others all you need to operate is a laptop and an Internet connection.

However, many entrepreneurs underestimate the amount of capital needed to run a franchised business until it gets self-sustained. It is essential to cut costs carefully whenever possible without hurting your business. Having enough capital could be the difference between growing your business and killing it.

When creating a financial plan for expansion, make sure you invest a generous amount of money on things that could boost your sales like advertising and marketing. It may not seem important right now, but if you want to start a franchise network and grow bigger promotion is not something you could save from.

Once you have a permission to franchise you need to think about the franchisee training and support programs. You don’t need to provide each new franchisee with an individual program. That is unnecessary and takes up too much time and resources, not to mention that you have to hire a specialist permanently for the position of franchisee trainee. Instead, you can provide standardized online training for all of your franchise partners. All the necessary information is available in one place and franchisees can find it easily. Make sure you update it when necessary.

You can cut your budget if you create an online franchise network where franchisees ask for support fellow franchisees. This will decrease franchisee assistance investments but will not replace them completely. Providing timely support is a primary obligation of franchisors and you should not neglect it.  

An important aspect of becoming an owner of a successful franchise are the franchisees. They are the most valuable resource you have. Take your time to choose the right candidates carefully. That will save you a lot of time and wasted investment afterwards. If you choose candidates who do not fit your franchise model you risk ending up working with someone who will give up soon after you have started your business together. Taking that risk can hurt your business so make sure you weight your preferences before choosing.

Our next advice is to wait to finance. Do not offer financing to franchisees just to attract them to buy your brand. If you have just converted into a franchise, chances are you cannot afford to do so. Wait until your business is stable enough to afford financing your partners or you can endanger their business as well as your own. If financing is an important aspect of your franchise concept, look for outside investors who are willing to finance your franchise partners.

Real estate occupies a significant part of the initial budget for a new franchise. Build your franchise concept in a way that would not hinder your business development. Many big companies that have just started franchising can provide the construction or the purchase of a franchise real estate site. They work with certain constructors or real estate agents for special deals that decrease significantly overall expenses. Smaller companies, though, are limited in their budgets and cannot do it, too. If real estate is an important aspect of your franchise concept However, you can negotiate more preferable conditions with selected third-party financers and point your franchisees to their services. This will eliminate real estate expenses for you and will facilitate franchisees’ budget. 

Talking of negotiations, it is a good idea to negotiate bulk prices with suppliers. As a franchise network owner you can agree upon lower prices for larger quantities of material.  This will ease the budget of you and your franchise partners.

When it comes to marketing and advertising, the same rules that apply to training could work, too. Use standardized promotional strategies that franchisees can customize for their area of operation.  

Remember, a franchise concept is expected to generate an appealing profit. If your business does not meet this requirement, franchising it could result in undesired consequences.