Owning a franchise or franchise business is one option that can be chosen to get additional income. Where the franchise business itself is a business that is carried out by borrowing names, brands, names, systems, methods, and procedures that have been established. With this one business scheme, you don’t need to bother building a business from scratch and thinking about concepts, the business can run immediately. Even so, starting a franchise business does not mean it is safe from the risk of loss. You still have to have a strategy in choosing a franchise business so that profits can be maximized. For that, before starting, it’s good if you know what needs to be considered when choosing a franchise business. Here are five powerful tips for choosing a franchise business that we have summarized.
Overview of Franchise Business
Basically, a franchise is a business relationship in which one party is given the freedom to exercise rights in the provision and utilization of goods or services owned by the other party. Franchisees sell products or services in accordance with the franchisor’s terms, while the franchisor is busy developing its franchise business. Each franchisee provides a royalty fee for its sales to the franchisor. Franchise is a business opportunity that is quite practical, especially for you novice business people. The products offered themselves are quite varied. Most franchises are indeed engaged in the Food and Beverage (F&B) sector. Starting from snacks, contemporary snacks, heavy meals, and various other types of products.
Franchise Business Criteria
Before starting, you must first understand and ensure that the business to be run and agreed upon is indeed a franchise business that meets the following criteria:
- Has business characteristics
- Proven to be profitable and have at least five years of experience and have business tips to overcome business problems.
- Have standards or offers of goods and/or services made in writing
- Easy to teach and apply by franchisees
- There is continuous support from the franchisor, in the form of operational guidance, training, and promotion.
- There are intellectual property rights that have been registered, in the form of trademarks, copyrights, patents, licenses, and trade secrets that have been certified by the competent authority.
How to Choose the Right Franchise Business?
Starting a business that is newbie friendly doesn’t mean it’s fail-proof. There have been many business people who want to make a profit but instead get lucky because they don’t know how to choose the right franchise business. Yes, when you jump into a franchise business, there are several things that need to be considered and thought out carefully so that you can get big profits, including the following:
Choose a Preferred Franchise Field
Before choosing a franchise business, you should first identify your own interests to know what you like. You can also choose a franchise field according to your expertise. For example, you love traveling and eating cakes. Well, you can choose your favorite franchise cake shop that doesn’t yet exist in your area. That way, you won’t have any difficulties, in fact you will be very happy to develop your business because what you will do is in line with your interests.
Do Research
Research is needed so that you can choose the right brand to run a franchise business. Here are some aspects you need to consider in researching a franchise business:
1. Opportunities
Starting a franchise business is not just buying and opening a business of a well-known brand but also need to see whether the opportunities are promising or vice versa. You need to be observant in comparing one brand with another so that the chances of success can really be obtained.
2. Franchise Requirements
Someone who wants to buy a franchise (franchisee) needs to meet the criteria and requirements given by the brand (franchisor). The reason is, the franchise also carries the good name of the brand. That is why you need to ensure that the requirements of the chosen brand can be met.
3. Capital
Calculate the capital needed to open the franchise. The reason is, even though there are many special franchise credit offers, you also have to pay a lot of interest. So, choose a franchise that suits the capital you have. Also, keep in mind that you should have other income that can support the franchise business if it turns out that there are additional costs that must be incurred.
4. Knowledge of Related Fields
While it’s true that often opening a franchise doesn’t require experience and knowledge, isn’t it better if you have it? Yes, apart from liking it, choosing a franchise business should also be based on your knowledge of the field. This will be an added value for the franchisor to allow you to buy a franchise.
Pay attention to business risks
Every business will definitely have risks, so you need to pay attention to what risks can be experienced when choosing a franchise business. It is highly recommended to weigh the risks of the franchise business offered. In addition, you also need to see what the growth and failure rates of the chosen business are like. When the potential failure experienced can reach 20 percent or even more, then you should be vigilant.
Choose a Proven Franchise Business
Businesses that have been tested and are well known to many people will certainly make it easier for consumers to buy these products. Given the product image in doing business is quite important in order to attract consumer interest. Therefore, it’s good if you can choose a franchise business that has been tested even though the price is a little more expensive, when compared to an untested or well-known franchise business.
Find a Strategic Location
The location you choose can affect business returns, you know! Choose a location in the center of the crowd. Conduct a survey of several places that are choices for franchise business locations. Also pay attention to the competition around the location, yes. Make sure your business development opportunities are big enough in the area.
Choose a Franchise Business that is Legal and Has a Trademark
Yes, of course you have to be able to choose a legal franchise business. Make sure if the business chosen has a business license that can be accounted for. Don’t let you choose a business that has an unclear license, which in the end goes out of business or goes bankrupt due to legal problems. This is important so that the franchise business that is run can run smoothly. Don’t forget to also make sure that the chosen franchise business has a trademark that has been registered with the DJKI Kemenkumham.
Understand the Financial Projections Provided
There are many documents that you can analyze when considering a franchise business, one of which is a document containing financial projection data. Test all assumptions prepared by the franchisor, from selling prices, profit margins, to sales volume.
READ ALSO: Let’s Understand and Take Care of Legal Documents for Franchise Business!
If necessary, you can take the time to monitor some of the nearby outlets to get an idea of the conditions on the ground.
To be safer, don’t forget to make a franchise agreement!
In general, a franchise contract is a written agreement between the franchisor and franchisee where this agreement becomes strong evidence and becomes the basis for doing things that have been agreed upon. Franchise agreements generally contain permission to use licenses and trade names, along with royalty compensation and procedures for using the license. This agreement must of course be made correctly according to legal requirements with various property rights owned by the franchisor. As based on the Minister of Trade Regulation (Permendag) No 71 of 2019. The contents that must be contained in the franchise agreement include:
- Names and addresses of the parties
- Types of intellectual property rights
- Business activities
- Rights and obligations of the parties
- Facility assistance
- Business area
- Term of the agreement
- Procedure for payment of rewards
- Ownership, change of ownership, and rights of heirs
- Dispute resolution
- Procedures for extension, termination, and termination of the agreement
- Guarantee from the franchisor
A franchise agreement is made to protect the business from risks that may occur in the future. In addition, a franchise agreement also has several other purposes and benefits, such as:
- Ensure the functioning of security and efficient and smooth business mechanisms for the parties
- As a tool to monitor and control whether the parties have done what was promised or not, or even violate the things that have been agreed upon.
- Prevent problems in the future because the parties can know their rights and obligations, and support the smooth implementation of the business.
- As evidence in the event of a dispute
KH Contact
Well, that’s the information about how to choose a franchise business that you need to know. Hopefully the above explanation can help you choose the best franchise and smooth the agreement process with the chosen brand, huh! If you have found a suitable partner to run a franchise business, you just need to proceed to the next step, namely making a franchise agreement contract. This agreement must protect the interests of both parties and perpetuate good cooperation, thus avoiding the franchisor and franchisee from conflict. To make it, it should be assisted or made by authorized parties or those who understand the law, one of which is a legal consultant such as Legal Contracts. Together with professional experts, we can help you for a free consultation on what steps and how the process needs to be done in starting a franchise business.
ALSO READ: 5 Most Promising Non-Food Franchise Business Ideas, Dare to Try?
Not only that, you can also simultaneously take care of franchise business legalities such as agreement contracts and Franchise Registration Letters (STPW). The STPW is valid as a franchisee business license to run the business. Let’s run a franchise business safely and smoothly by visiting the KH Services – Franchise Contract page. If you have further questions, contact us at Ask KH or send a direct message (DM) to Instagram @Kontrakhukum.
