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Franchisors succeed for various reasons, and they all try to entice your investment dollars into a franchise. You get the brand, the product or service, the national support—each is important to your success. However, as a franchisee, there are important financial steps to take on your end of the partnership to feed your franchise’s profits.
Get Serious About Your Business Plan
Your franchisor already knows how your business will run—they literally wrote the manual. Before you sign your franchise agreement, the franchisor team will review you, your experience, and your finances. Even so, your business plan is critically important for two primary reasons.
First, you will need a well-designed plan to present to lenders. Unless you are sitting on “extra” money, commercial lenders expect you to provide enough information for them to determine your franchise’s likelihood of profitability and success. You will also have to defend your plan as part of the lender’s review process.
The second reason to develop an accurate business plan is to guide your early steps in franchise ownership. If you have faith in your plan and honorably represent your goals and the franchise brand, your business plan supplements your decision-making, especially in the early months of operation.
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Commit to Regular Financial Reviews Against Your Plan
Nobody can do everything well, but every franchisee must thoroughly understand their financial plan, even if it takes a helper.
Financial forecasts are part of the business plan and will be important for operational decisions. The plan portion is based on reasonable assumptions for your chosen franchise, demographics, and personal finances. But it could differ from the plan once you open the doors and put it into practice.
You must check against your plan regularly to understand if you are meeting your plan’s goals. Do not do this alone; find experts to help review your financial operation—monthly or even weekly to start. You and your accounting and financial expert will evaluate what is working and what needs to change to meet your plan goals.
The early days of a franchise determine its trajectory toward profitability. With a vigilant commitment to financial review, you will steer your franchise toward quicker success.
Appreciate the Value of Additional Marketing
Marketing costs can be troublesome to business owners—it feels like money should stay in their pockets. Plus, marketing rewards are often difficult to measure.
As a franchisee, your fees include marketing support on a national basis—you have little control over these marketing programs. They support brand awareness, of course, but franchisees also need to beef up marketing funds targeted very locally. You will have competition in your market from established businesses.
To build a more reliable, local customer base, marketing is necessary for your local area. You have insights about your service area that you can use to build your customer base, and your local community involvement builds trust. So whether it’s sponsorship or partnering with related businesses, dedicate funds to marketing your franchise to the group supporting you—your community.
Investment Fodder for Your Future
Investing in any franchise means taking some risk, but you also believe that you can successfully grow your own business.
No matter which franchise you choose, it will take some money to successfully feed the business’s early appetite for capital and growth. You immediately get the benefits that a franchisor offers, but be sure that you include a hefty helping of financial commitment to help ensure a solid growth plan.
Anne Daniells is a co-owner of Enterprising Solutions, a professional services firm specializing in corporate communication and financial improvement for businesses where she shares decades of corporate and entrepreneurial experience—including franchise ownership—in her writings on business culture. She has authored hundreds of articles for publications including AllBusiness.com, TweakYourBiz.com, and MSN.com. Reach out via her website for more on where corporate culture, communication, and human architecture collide.