How Do Franchises Work?
Published on: 27 March, 2020
Reading Time: 5 minutes
What is a Franchise?
If you are looking into buying a franchise, you may be wondering exactly how franchises work. It’s essential to understand the ins and outs so that you know what you’re getting into. A franchise is an existing business that is already established. Buying into a franchise means that you’re purchasing a location and have permission to operate using the brand and can sell the brand’s products or services.
How Does a Franchise Work?
Buying a franchise gives your business instant brand recognition. As the business owner, you are also likely to receive financial and marketing support. The advantage of purchasing a franchise is that it’s significantly less strenuous than it is starting from scratch with your own business idea. You’ll be able to operate your business location as a part of a bigger brand without having to build it from the ground up.
This method of starting your own business can drive success faster and farther than doing it all on your own. You may still need financing to purchase the franchise. However, that financing will get you precisely what you need without all of the guesswork surrounding what is and isn’t effective. You’ll get support form the overarching brand while being allowed some creative freedom to run your own business the way you want to.
What do Franchise Fees Pay For?
The franchise fee unlocks your ability to operate under the proprietary business name and systems. It’s quite literally a license to own and operate the franchise location, in addition to the setup support you receive. Today, most franchise fees are between $20,000 and $50,000.
The franchise fee is different from your total upfront cost. It could cost upwards of $200,000 after you factor in other starting expenses. It’s essential to research your fees before committing to buying a franchise.
There are other franchise fees besides the initial licensing costs. Consult the franchisor about average working capital expenses. Whether it is a property or storage facility downpayment, truck rental, special equipment or even start-up marketing expenses, all of it will add a significant financial burden on top of the initial franchise fee. Make sure you can cover your working capital at the stage of setting up the business and up to the point when the business is self-supporting. You must also cover marketing fees and royalties. The hope is that you can capitalize on the brand, but that involves paying monthly fees for marketing materials that are consistent with the brand. These marketing fees are likely based on your monthly revenue.
The royalties you pay are also a percentage of your monthly revenue, but that percentage is usually higher than marketing fees. As a franchisee, the higher your revenue, the more you’ll pay in royalties because you owe the franchiser for using their name.
Think of it as a monthly lease on the business name. The more successful you make your franchise, the more money you’ll owe them, and that’s okay. It means you’re doing your job. The more money you make, the easier these fees will be to pay back.
Process of Joining a Moving Franchise
Moving companies all over the United States and Canada need professional help all year long. This industry earns billions in revenue despite not having consistent standards of excellence when it comes to service and customer satisfaction. Instead of starting your own moving company, you owe it to your customers to provide a predictable and dependable experience.
It all starts with a call to the franchise team of the proprietary business you want to own. Remember: you’re interviewing them as much as they’re interviewing you. Ensuring that your goals align with those of the proprietary business is pivotal to your future success.
They’ll review your application and conduct a management call. Scheduling an opportunity to meet in person will help both you and the franchise team to learn more about each other. They’ll see how you envision running your franchise, and you’ll find out all about the support they offer.
Once your application is approved, you can begin launching your franchise. Hire employees and schedule the training you need to operate a successful business. You’ll receive all the support and systems you need to open as quickly as you can.
By opening a moving company franchise, you purchase an investment in the success of the overall brand. By delivering an experience that aligns with the expectations of the brand’s clientele, you elevate the perception of the brand and receive a much better return on your investment. You’re part of a community of business owners with a common goal, and you can lean on each other for support, encouragement, and success.
Why Become a Franchisee?
Becoming a franchisee has a lot of perks. You get the support you need from experienced professionals with the same independence of operating a small business. You don’t always need previous experience to run a successful business. Sometimes it’s easier to get the financing you need to open a franchise, and they typically have a higher rate of success than startups. The financial risk you’re taking is thus significantly smaller.
By opening a moving franchise instead of trying to start your own company, you will have access to proven management strategies, an established reputation, consistent practices, and ongoing support.
Enjoy the perks of owning your own small business while relying on the support from an established brand. You’ll reap the benefits of success without having to fight through as many struggles.