The 5 Keys to Franchise Success

The 5 Keys to Franchise Success by Neil Burnard

Like any other business, reaching franchise success takes hard work, determination, and talent. It requires that you educate yourself on the numerous mistakes many franchisees have made in the past, so you don’t repeat them. It also requires things like adopting the right working habits, having the right attitude with the people surrounding you, setting up the right team, making the correct financial decisions, etc. The list of skills you will need to reach success can get overwhelming, but don’t stress out. I’ve compiled a list of the top five key factors you will undoubtedly need if you want to become a successful franchisee.

The Desire to Learn

The first step towards franchise success is truly understanding your franchise inside and out. While one of the huge benefits of buying into a franchise is the fact that you are handed a proven business model (meaning you don’t have to build one from the ground up), you still have to take the time to master the systems in place. You need to thoroughly understand your franchise agreement, all aspects of day-to-day operations, and how to enhance business while preserving the brand and your investment. The more ready you are to learn, the better able you will be to make your franchise as successful as possible.

Understanding your franchise will be an ongoing process. Agreements may be amended, managing positions may change, etc. One of the best way to stay current is to cultivate and preserve all communication with your franchisor. You should also communicate with your fellow franchisees because at the end of they day you are all representing the same brand and can learn a lot from one another.

Strong Work Ethic

When you’re part of a franchise, you’re selling the same products/services as every other franchise, so what’s going to make you stand out? Your work ethic.

Demonstrate your ability to get things done while minimizing costs and maximizing sales at your location. The hard work you put into getting your individual location off the ground will pay off for years to come.

Never assume that just because you are a franchisee of an established brand that money will come easy. You’re a business owner which means you’re responsible for not only yourself but your employees success. A little bit of your heart and soul should be invested in the business. Implement a solid work ethic that will naturally push the business and those around you forward.

Realistic Financials

As a franchisee, a major part of your job is to be on top of the finances. But before you even become an owner, you should take the time to analyze every aspect of what your initial investment will require.

Calculate how much you can realistically invest and how much you are willing to risk. Don’t let emotions and excitement get in the way. This has to be a completely rational decision. If you aren’t able to provide enough working capital to stay open, you might as well flush your money down the toilet right now. And don’t forget to consult your attorney and financial advisor before committing to anything.

As the company gets up and running, you’ll need approach your financials with the same stark objectivity. The the better grasp you have of your bank account and the actual cost of running your business, the better business decisions you will be able to make down the line.

A Solid Team

You might be the greatest business person in the world, but you’re also human which means you can’t do everything by yourself. In order to take your franchise to the next level, you will need the right team.

Don’t rush through this process. Recruit the best candidates, engage with them on a personal level, and make them feel valued. Keep in mind that these people can leave any time they want, so it’s important to be a good boss. As you build your team, you also will have to sustain and continuously engage them. Don’t allow employees to get stuck doing boring work, be fair, challenge them (in a healthy and acceptable manner, of course), and provide salary increases for a job well done, etc.

And remember, just because you’ve hired a great team doesn’t mean they won’t need franchising training. Take the time to train and develop your employees. With the right attention, they will not only get better at their jobs, but they will feel important to the business.

The Right Attitude

As a franchise owner, your team will ultimately look to you as their prime example. If you have a negative attitude, don’t be surprised if your employees catch it. And worse, don’t be surprised if that negative attitude eventually destroys your business.

Make it a conscious effort to adopt the right attitude both in and out of the office. While you’re in the office, be enthusiastic about business and your employees progress. Enthusiasm is contagious, and yours will make your employees excited to put in the work.

You’ll also want to implement the right attitude when you’re providing customer service. Letting your customers know they come first will be invaluable for your franchise to succeed.

Lastly, take time for yourself and your family. Spending quality time with the people you love will revitalize you. You will come back more determined and with a more positive outlook, hence continue to push your franchise business forward.

Final Thoughts

There you have it: five key factors that will guide you to franchise success. Keep in mind that a lot of this will depend on your commitment and mentality towards the business. If you truly want to see it flourish, you will find it in you to achieve your goals.

How to: Financing Your Franchise With Retirement Funds

How to- Financing Your Franchise With Retirement Funds by Neil Burnard

Seeking and obtaining financing for a franchise can feel like an uphill battle. In a volatile world economy, it’s even harder. Unfortunately financing options like standard bank loans, SBA loans, or even loans that are secured by equity (eg. your home) are sparse these days. So how are you supposed to finance your dream franchise?

There is one option people often overlook: you can use your retirement funds as your source of financing. Most people assume they should only use that money for it’s original intent (retirement), but using your retirement funds to finance your franchise can help you escape massive debt and high interest rates. It can actually be a wise decision, so long as you educate yourself on what’s the best way to go about using these funds.

There are two main ways you can source money from your retirement account. Depending on what country you’re living in, the particulars can vary slightly. Take the US for example: the first and simplest approach is to borrow the money from your 401(k). Depending on what kind of account you have set up, you can borrow up to 50% of your total amount or $50,000, whichever is less. Keep in mind that with this approach you will have to set up a repayment plan with interest for your 401(k) and rules and regulations will vary according to your plan provider.

The second, but more complicated, way for you to tap into your retirement funds is with the Rollovers as Business Startups (ROBS) approach. This plan allows you to open your company, set up a retirement account within you new business, and then move your existing retirement funds into that new retirement plan. After that, you are basically free to direct and use the funds in the retirement account as you see fit.

Just some of the advantages the ROBS approach are:

  • Control: Because you are not subjected to typical restrictions other financing approaches may impose on you, you will have the ability to use the money when, where, and how you want without having to worry about extensive paperwork or delays.
  • Minimal fees: Usually, you will not have to deal with any transactional or asset-based fees once you redirect your retirement plan. This translates into saving a good amount of money that otherwise would be spent on traditional fees and commission expenses associated with traditional financing plans.
  • Diversification of investment: Because you don’t have any restrictions limiting you on how you can invest, you can invest anywhere. Consider investing in stock and bond mutual funds, other business opportunities, real estate, etc.

Additional pros:

  • It doesn’t involve any usual limitations and repayment requirements associated with a standard loan from your 401(k).
  • It can be used with an IRA account.

The greatest thing about the ROBS approach is that ultimately you’re the one making all the investment decisions. You’re not tied to some individual or entity that chooses for you the fate of your company. But again, when it comes to financing your franchise, it’s important you fully educate yourself before you start making any financial decisions. This list of advantages should serve you as a guide, but ultimately you will need to figure out what’s best for your individual circumstance and your franchise dreams.

Other countries will have different retirement plans/codes as well as their own regulations, so look into every option that is open to you before making your final decision.

5 Common Mistakes Franchisees Should Avoid

5 Common Mistakes Franchisees Should Avoid by Neil Burnard

A common quality people within the franchise industry seem to share is being risk averse. We buy into a franchise for the whole purpose of it being a more dependable road towards success than starting our own business from the ground up. Being calculated, thoughtful, and thorough in your decision to buy a franchise is important, but there are going to be bumps in the road no matter what you do. While you can’t avoid every mistake, you can at least educate yourself on the most common mistakes franchisees make, so you know a red flag when you see it.

Mistake #1: Trying to finance everything yourself.

Many people (falsely) believe that if they can afford to cover their franchises expenses without borrowing then they should. The goal seems reasonable: pay for things upfront and you’ll avoid fees and interest in the long run. Unfortunately, this can actually limit your businesses options in the future.

In a more volatile market, you can never been sure when things are going to take an uptick or a downturn. If the market starts performing worse than you originally expected, you could end up needing to apply for a loan anyways, accept now you’re in the worst possible conditions (you’re reporting a loss and underperforming.) A bank is probably going to look at your situation and reject your application. A few more months of uncertainty, and you could go under before the next uptick.

It’s actually a better safeguard to request a loan at the outset when your business plan shows promise and no problems have had a change to occur yet. You’ll have a good chance of being approved, and you’ll feel better knowing you have a cash safety net. Plus, you aren’t burning through personal capital that could potentially leave you or your family untaken care of.

Now this isn’t all about reducing your risk of failure. This decision can also help you when things are going well. If you decide you want to expand (perhaps buying a second territory or another outlet), you might need some extra cash to do so. If you approach a bank, especially in the current economic environment, most banks will require you to put in more money at that time. Again, if you had borrowed at the outset, and kept your own money as a backup, you could expand without putting down more money.

Mistake #2: Having a vague business plan

When a new franchise is first getting going, they need a comprehensive business plan that will take them from day 1 to consistent profitability.

You can’t come in day-to-day only focusing on the tasks in front of you. That won’t lead to growth. You need to set real goals, deadlines, benchmarks, and indicators of success. If you don’t have something to measure your business against, you won’t have any idea whether or not you’re on the right track. And worse, you won’t know when or how to intervene.

Mistake #3: Not planning for sufficient working capital

Before you plan for anything, you need to be sure that you can pay for it. You should have a projected profit and loss account and a cashflow forecast to establish how much money you need at the outset. If you run out of working capital before you’ve reached the goals set forth in your business plan, you’re done. This is something you should be thinking about now, not months into your venture when you’re suddenly running short.

You will also need to account for certain variants. For example, typically sales start slow and then gain momentum as the business gains momentum. Overheads (think salaries, rent, etc), on the other hand, remain pretty consistent for the first year. This means the first few months of business will require more cash to function.

Conversely, if your business has a spike in sales, there is generally an extra expense before the money from the sale is received. This too means you’ll need extra working capital during this lag-time.

Mistake #4: Forgetting to go back to your projections and business plan

It’s easy to get caught up in the daily grind and forget to revisit your initial projects and business plan as often as you should. Let it go too long, and you’ll likely see that your business has driven off course.

Mistake #5: Refusing to learn

Becoming a business owner for the first time, you’re likely coming into the game with a few expertise under your belt, but you’re not going to know everything. You might be a master of sales, but have never touched a marketing campaign before. Maybe you can understand a profit and loss account, but you’re not sure what to do with the information once you understand where you’re falling short.

Most franchisors provide training on every aspect of their business, so that you can become the jack-of-all-trades you need to be, at least in the beginning. As your business expands, you’ll be able to hire more and more people with niche expertise who can take these parts of the business ten times farther than you ever could. But for now, you at least have to have a working knowledge of everything that takes place under your roof.

Conclusion

There are a million pitfalls that a new business owner can run into, but lucky for franchisees, most of the kinks a new business faces has already been smoothed out by the franchisor. All you need to do is be ready to learn, constantly check in to make sure you’re hitting your mark, and adjust your plan as needed. And remember, if you feel stuck, never be afraid to take advantage of the knowledge, experience, and expertise of your trusty franchisor. They are there for a reason!

Franchisee-Owned Businesses in the UK Hit New Records in 2015

Released in January 2016, the 2015 British Franchise Association (BFA) / NatWest Franchise Survey found that the UK’s franchise sector was operating at record levels over the course of the past year. Specifically the industry hit all-time highs in turnover, employment, and the number of franchisee-owned businesses in 2015.

The survey calculated that franchising contributed a whopping £15.1 billion to the economy last year with over 44,000 franchisee-owned businesses now in operation across the UK. These businesses are estimated to employ up to 621,000 people.

And these businesses aren’t just running, they’re thriving. The survey found that 97% of the franchises surveyed were in fact profitable with over half of all UK franchises achieving turnover in excess of £250,000.

An interesting trend also emerged with todays youth: the number of young people (those under 30 years of age) entering the franchise sector is increasing. In fact, a fifth of franchisees who started their business in the last two years were under 30 when they did so.

The icing on the cake was the impressively low commercial failure rate, with less than 1% of franchises closing their doors for this reason last year.

Successful franchises within the UK also seem to be looking to grow abroad. Right now, four out of every five franchise brands is domestically owned in the UK. 38% of those were found to be expanding their business model overseas, and an additional 11% reported considering doing so in the future.

As the Director General of the BFA Brian Smart summarized, “Good franchising continues to deliver serious dividends for Britain’s economy, creating businesses, jobs and wealth for local communities across the country.. The outstanding performance of the sector, in good economic times and bad, shows the power of the franchise model and its impact on the UK’s business landscape increases each year.”

You can learn more about Neil Burnard’s career and expertise on his main website.

High Cost vs Low Cost Franchises

High Cost vs Low Cost Franchises by Neil BurnardWhen deciding on what franchise to invest in, a big factor can be the cost to invest. Some franchises cost under £20,000, while others can be upwards of £75,000 or even more. For most people, that’s a difference significant enough to seriously limit their options or at least make them think twice before jumping in to an otherwise amazing sounding business. There are some key differences to keep in mind when deciding, so here is a quick run down of what to expect.

Low Cost Franchises

At the lower end, it’s important to understand that while the entry cost will probably cover what you need to get started, like supplies, initial training, etc, it will not include working capital, which you will need until your business gains enough momentum to start turning some of its own positive cash flow. Before you buy in, make sure you know exactly what is and is not included in the cost. If you bought into a less expensive franchise because of your own financial constraints, unforeseen costs early on could be a make it or break it moment for your business before you’ve even had the chance to take off.

You will also need to make sure your personal expenses are covered for a few months, at least. If you’ve run the numbers, and you’re going to run out of your own funds after a month, it’s time to look into different options or wait until you’ve saved up a larger nest egg. Learning to budget in general is going to be key, but remember, it’s one thing to hold off on buying a new luxury car, it’s another to try to hold off on paying rent.

Depending on what the franchise provides, you may also want to have some extra cash set aside for things like sales and marketing. However, many franchises will include this as well. That’s why it’s important to understand exactly what you’re getting.

The good news is that when you’re buying into a franchise, you’re buying into a business that has been thoroughly tested. Your franchisor should be able to tell you exactly what to expect, your fellow franchisees will be a community you can draw tips and lessons from, and ongoing training is a great wait to develop your business as it grows and flourishes.

Lower cost franchises often fall into the sales or marketing industry because the marketplace is big, the startup costs are low, and the potential for growth is always there. This means you’ll probably want to be comfortable selling, talking on the phone, and working fairly independently. You may not even need to employ staff for awhile.

High Cost Franchises

Higher cost franchises get their cost because they usually require things like premises to operate, special equipment, branded decor, and more (a great example is a fitness club.) There’s a lot more training required for things like operational systems and the hiring, training, and development of your staff. The setup process also takes much longer.

Higher cost franchises usually need the help of bank loans and overdrafts, so that cost will need to be incorporated into your business plan. The good news is that with approved franchises, banks will often lend up to 70% of the total cost of setting up. Even better, these loans will usually come with repayment and interest rates that reflect the approval ratings of the franchisor, which means you get a great deal directly because of the prior success of the franchise you’ve just bought into.

One thing to keep in mind is that with more staff comes more managerial responsibilities. If you’re not the type of personality that enjoys managing or being responsible for the well-being and success of others, you might end up disliking a big part of your job.

Conclusion

With so many great franchise opportunities available, the biggest factor in predicting your success has more to do with finding the franchise that’s right for you. Be as candid with yourself as possible about your limitations, concerns, fears, and deal breakers. Weight your options carefully, and make a pro’s and con’s list (because there will be pro’s and con’s to every situation.) Take the time to find the right franchise for you.