๐ณ ๐๐ผ๐บ๐ฝ๐ผ๐ป๐ฒ๐ป๐๐ ๐ผ๐ณ ๐๐ต๐ฒ ๐๐ฟ๐ฎ๐ป๐ฐ๐ต๐ถ๐๐ฒ ๐๐๐๐ถ๐ป๐ฒ๐๐ ๐ ๐ผ๐ฑ๐ฒ๐น ๐๐ฎ๐ป๐๐ฎ๐

Perhaps you are considering leaving your corporate career to go into business for yourself, or starting a venture part-time while you transition out of that career or are contemplating a move to the U.S. to invest via the E2 visa program or have graduated college and donโt want to work in the corporate world.ย All are valid reasons to reflect upon franchise ownership.
ย Letโs talk basics. Aย franchiseย location is a type ofย businessย that is operated or managed by an individual(s) known as aย franchiseeย using the trademark, branding andย business modelย of a franchisor. In this business model, there is a legal and commercial relationship between the owner of the brand (franchisor) and the individual (franchisee).
ย In essence, a franchisee pays a franchisor an initial fee and ongoing royalties.ย The franchisee, in return,ย gains the use of a trademark, the franchisorโs ongoing support, as well as the right to use the franchisorโs business system and sell its products or services.
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The business model for each franchise concept is different and you will need to evaluate it as part of your due diligence.ย What exactly does it encompass?ย Many componentsโฆ
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๐ฉ๐ฎ๐น๐๐ฒ ๐ฃ๐ฟ๐ผ๐ฝ๐ผ๐๐ถ๐๐ถ๐ผ๐ป
From a customerโs perspective, they not only want to know how a product or service is different from the one they may already be using but also what value it has for them.ย Is it able to improve upon or replace the current product or service and are they receiving the best possible deal?ย From the potential franchiseeโs perspective, the value proposition differentiates the brand from competitors.
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๐ ๐ฎ๐ฟ๐ธ๐ฒ๐ ๐ข๐ฝ๐ฝ๐ผ๐ฟ๐๐๐ป๐ถ๐๐ ๐ฎ๐ป๐ฑ ๐๐ฑ๐๐ฎ๐ป๐๐ฎ๐ด๐ฒ
When considering any business, you need to define customer segments that share common characteristics that meet your demand. These characteristics can be “hard” variables such as age, gender, location of residence, level of education, occupation and revenue level, or “soft” variables such as lifestyle, attitude, values, and motivations for buying.
Hard variables can help estimate the number of potential customers a business can have. For example, for an after-school STEM/STEAM program, you should know how many school age children reside in the territory and birth rate estimates for upcoming years.ย Soft variables can help identify motivations that lead to purchasing decisions including price, prestige, convenience, durability and design.ย For the same after-school STEM/STEAM program parents want to help their children to perform better academically and improve scores to be better able to attract college scholarship money or attend the desired university.
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๐ ๐ฎ๐ฟ๐ธ๐ฒ๐๐ถ๐ป๐ด ๐ฆ๐๐ฟ๐ฎ๐๐ฒ๐ด๐ย
In order to offer a product or service successfully in the market and meet audience demand, evaluate the 3 Cs and 4 Ps:
๐พ๐ช๐จ๐ฉ๐ค๐ข๐๐ง: Your audience or target.ย If you donโt enjoy working with seniors, no matter how attractive the large market appears, an in-home senior care business isnโt really for you.
๐พ๐ค๐ข๐ฅ๐๐ฉ๐๐ฉ๐๐ค๐ฃ: Who are the direct and indirect competitors?ย Do they or will they threaten the business?
๐พ๐ค๐ข๐ฅ๐๐ฃ๐ฎ: Determine the franchisor goals, strengths and weaknesses.ย Does the franchise continually strive for improvement and optimization?ย Look for internal (franchisee validation) and external (Franchisee Satisfaction awards) analysis.
๐๐ง๐ค๐๐ช๐๐ฉ: Design-Appearance? Quality? Packaging?
๐๐ง๐๐๐: Knowing supply, demand, competitive product, other fees, pricing terms. What price will the market bear?
๐๐ง๐ค๐ข๐ค๐ฉ๐๐ค๐ฃ: Advertising, public relations and promotional strategy?
๐๐ก๐๐๐: How and where is it distributed? Is that convenient for the customer?
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๐๐ผ๐บ๐ฝ๐ฒ๐๐ถ๐๐ถ๐๐ฒ ๐๐ป๐๐ถ๐ฟ๐ผ๐ป๐บ๐ฒ๐ป๐
In 1979, a Harvardย economist specializing in industrial organization, Michael Porter, wrote a Harvard Business Review article entitled “How Competitive Forces Shape Strategy.” Today it is still considered one of the best sources on the subject of economic market competition.
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๐๐๐ง๐๐๐ฉ ๐ค๐ ๐๐ฃ๐ฉ๐ง๐ฎ
Companies decide to enter a market for any number of reasons-the area is under-served,ย profit margins are unusually high or the product has a distinct advantage and/orย a patent. Porter asserts that it is essential for business survival to focus on futureย sources of competition rather than on current products.
ย ย ย ย ย ๐๐ช๐ฅ๐ฅ๐ก๐๐๐ง ๐๐ค๐ฌ๐๐ง ๐๐๐๐ฃ ๐๐๐ฃ๐ฎ ๐ฝ๐ช๐ฎ๐๐ง๐จ
Are there only a few brands supplying the product/service in the market and buying demand is high? Pricing and revenues will be high for those companies.
ย ย ย ย ย ๐ฝ๐ช๐ฎ๐๐ง ๐๐ค๐ฌ๐๐ง ๐๐๐๐ฃ ๐๐๐ฃ๐ฎ ๐๐ช๐ฅ๐ฅ๐ก๐๐๐ง๐จ
Are there many suppliers of a particular product/service? Pricing will be very low.
ย ย ย ย ย ๐๐๐ง๐๐๐ฉ ๐ค๐ ๐๐ช๐๐จ๐ฉ๐๐ฉ๐ช๐ฉ๐๐จ
Too many similar products or services provide a threat to survival (unless the market is large and its expected duration is many years i.e. in-home care).ย But threats can comeย from a new, dissimilar product replacing an existing product (i.e. email vs. post officeย mail).
ย ย ย ย ย ๐๐๐ง๐๐๐ฉ ๐ค๐ ๐พ๐ค๐ข๐ฅ๐๐ฉ๐๐ฉ๐๐ซ๐ ๐๐๐ซ๐๐ก๐ง๐ฎ
Porter’s fifth force is the cumulative effect of the first four. Competition can come from anywhere, from innovative new products, from the advent of strong new providers or buyers controlling the marketplace, or from product replacements made possible by deregulation, innovation, or more cost-effective manufacturing procedures, relying on innovative technology, lower-cost labor or both.
This may seem ominous since no one has a crystal ball but the Franchisor should knowย their competitive environment especially if they have been around many years.ย It is stillย prudent to do some investigation on your own but the brand should be able to give youย good picture of their competitive outlook.
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ย ๐ฅ๐ฒ๐๐ฒ๐ป๐๐ฒ ๐ ๐ผ๐ฑ๐ฒ๐น
A key component of a conceptโs business model is how it generates revenues. It states which revenue source to pursue, what value to offer, how to price the value, and who pays for the value. Examples: retail, subscription, advertising, licensing, transactional, etc.
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๐ฆ๐๐ฝ๐ฝ๐ผ๐ฟ๐
How are franchisees supported?
ยทย ย Type of training, duration, etc.
ยทย ย Home office support: site selection, marketing (brochures,ย ย ย promotions, social media, advertising, etc.), operationsย ย ย ย ย ย manual, technology, meetings/conferences
ยทย ย Field support: area manager, field visits
ยทย ย Support from other franchisees
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๐ข๐ฟ๐ด๐ฎ๐ป๐ถ๐๐ฎ๐๐ถ๐ผ๐ป๐ฎ๐น ๐๐ ๐ฝ๐ฎ๐ป๐๐ถ๐ผ๐ป
In its own way franchising is an expansion of the organization through either single or multi-units.ย Area development is an added dimension.
Within a franchise concept, a franchisee will grow the business by adding staff, services, etc. when they reach certain milestones.ย Ensure that the franchisor has a plan in their model as you expand.
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๐ฆ๐๐บ๐บ๐ฎ๐๐ถ๐ผ๐ป
Most of the information can be discovered via
ยทย ย ย ย the franchisor through the Franchise Disclosureย ย ย ย ย ย ย ย ย ย ย ย Document (FDD), conversations with them, through theirย ย ย ย ย collateral
ยทย ย researching the industry and market yourself
ยทย ย speaking to other franchisees during validationย ย
You like the products and audience but does the business model resonate with you?
No-charge Franchise Consultation: 855-725-1970 (U.S.); 760-473-4659 (SMS; WhatsApp). malbanna@global-business-connect.com. View call availability on the calendar or schedule a call at https://app.acuityscheduling.com/schedule.php?owner=16315311
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