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Apr, 17 2011

Are you choosing the right franchise?

Owning a franchise gives one the best of both the worlds, the freedom of owning a proven business and the peace of mind of an expert support. However, the franchise world is beset with enormous uncertainties. Choosing the right franchise can be the first

SO what constitutes the right franchise opportunity for an aspiring entrepreneur? For over a decade, I have helped many aspirants in finding the right franchise business, authored several articles, interviewed innumerable prospects, at several franchise shows and networked with leading franchise experts, who have created path-breaking concepts. In my opinion, while it's vital to choose a brand that has a differentiated offering and high visibility, it's equally critical to invest in something that matches one's skills and competencies, complements his personality and lifestyle. In a good franchise system, you're in the business for yourself but not entirely by yourself. Hence, first and foremost, any prospective investor needs to ascertain how well a particular brand or franchisor prepares new franchisees for success. Since the franchisee is investing in a proven system for producing predictable outcomes, the onus lies on the franchisor to train everything that a franchisee needs.

In addition, an interested investor should also assess franchisor's efforts towards optimising collective purchasing power of franchisees, enabling savings on inventory and supplies, thereby, offsetting most of the ongoing royalty fees. Also, one needs to ensure that the brand has specific strategies to attract enough customers to support his franchise operations consistently. A good initial marketing programme must attract enough trial customers towards franchise. Besides ongoing marketing programmes need to drive enough new customers to the business to offset attrition and meet growth target.

Most importantly, an investor needs to estimate the breakeven point as well as how much a mature franchise unit will make. Be sure to compare the expected returns to the overall investment size and individual financial capability to ensure that the returns appear to be reasonable. An ideal franchise has robust and consistent sales growth and this is achieved by increasing customer numbers and not simply via price increases.

However, no opportunity comes risk free. Even in franchise set-up, the franchisee is vulnerable to threats that the franchisor has and one faces the same competition as the franchisor.

The success of the franchise set-up depends not only on the business model but also on the ability and willingness of the franchisee partner to be successful in the business.

Final thought

Finding the right franchise model for your investment is like a process of business match-making. Once you find a brand that meets your parameters, ensure that you gel well with the people involved. Since, you'll be in a very close relationship with them in future, you need to be sure that everyone is on the same pedestal, in terms of expectations and values.

Sonya Chowdhry is Director, Franchise India Brands Limited.

BOX

Must-do for franchisees

4Choose brand that has a differentiated offering and high visibility.

4Invest in something that matches your skills and competencies.

4Ascertain how well a particular brand or franchisor prepares new franchisees for success.

4Evaluate franchisor's training programmes and support systems.

4Assess franchisor's efforts towards optimising collective purchasing power of franchisees

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