Clean up with a Franchise Business

What are you actually paying for when you buy a franchise?

We met Joe in my earlier blog series, where he looked at the option of starting a business or buying an existing one. Joe is a little frustrated by the choices and just wants to speed up fulfilling his dream. At a family gathering Joe bumps into his nephew Lee, who owns a franchise, and they get talking over a few drinks.

Joe asks "Why would you pay someone for a mop and bucket to start a cleaning business?". Lee is taken aback by his uncle's bluntness but Lee has asked himself this question before. "Look uncle Joe" Lee snaps, cutting off his uncle's banter. "There are many benefits of a franchise. It even helped me fast track my own business and I would not have been this successful in such a short time by myself". Joe finally comes around to Lee's point of view and realises he shares a similar passion. Joe leans in and says "tell me more about the benefits of franchising".

Turnkey Business

Buying a franchise lets you operate a proven business model with a structure that has been tested and refined in the real world. Actual costs and profit margins are well established and this helps give you great insights for your expected return on investment.

Systems & Procedures

Having efficient steps to follow for each job task enables even difficult tasks to be performed by the lowest level of staff. For example McDonald's don't hire chefs to work in their restaurants. Better still, by having a standard way of doing things you are able to replicate results more consistently.

Brand Power

A franchise helps potential customers to recognise your business and associate the value of its products and services with you. This allows customers to anticipate the same level of experience when dealing with you, based on what they may have experienced elsewhere or heard about from friends & media. People will actually line up for hours just to buy the latest iPhone, or even an In-N-Out burger.

Support Network

Most franchise opportunities give you access to a broad range of benefits that you wouldn't get if you went it alone. Many franchise opportunities include training and ongoing management to ensure that you meet the returns promised in the glossy sales brochure. In addition they can provide access to reduced costs through their supply chain and larger buying power. Even to the point where most fast food chains get their stores built through prefabricated designs and literally pop up overnight.

Buyer Beware

Eagle Boys Pizza recently showed that owning a franchise can still be risky. And you also need to be wary of the restrictive nature of a franchise. You are buying into the way things are done around here and you will be paying a pretty penny in royalties for it. There is also a marketing fee to keep fuelling your brand.

"Gosh Lee, I'm glad that you know more than you let on. Is there any chance I can get you to help me clean up after this party?". "Not a worry Joe. And you best go see the taxman again, if you are going to finally make a move on your business dream".

Do you have an idea brewing for a small business? Call the barista's of books at Logan & Hall Accountants on 03 5032 1121. Because our business is more than just counting beans and we're pretty grounded in your passion, whatever that might be.

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