When comparing the benefits of franchising over those of starting your own enterprise, some of your best preparation comes in knowing what challenges most often cause businesses to fail. According to the U.S. Small Business Administration, one in three small businesses won’t make it past two years; half won’t exist in five years.
Some key reasons why businesses fail include:
- An unrealistic business plan
- Inadequate financing
- The owner’s lack of business knowledge
- Underperforming marketing
When considering a franchise versus starting your own business, there are advantages to franchising when it comes to building a smart and sustainable business.
The Business Plan: Franchise vs. Indie Business
Your business plan maps out how you will make a profit. With a franchise, you have a proven business model which makes preparing a realistic business plan much more achievable. When you start a non-franchised business you don’t have that foundation; you have to create it yourself.
At Floor Coverings International (FCI), we work with franchisees to create 2-, 5-, and 10-year business plans as part of our franchisee support. The business plan is an important guide to operating and growing a business to its full potential and we want our franchisees to reach their goals as entrepreneurs.
Your business plan starts with a solid financial section detailing startup expenses, cash flow statements, and future projections.
Your startup expenses
Startup expenses encompass everything you need to launch your business. This includes one-time fees and ongoing fees. Franchises call this the initial investment.
For example, the initial investment for a Floor Coverings International (FCI) franchise is $165,400 to $235,100. This includes your franchise fee, business operations package, marketing services, and working capital for three months.
Preparing your cash flow statement
The cash flow statement is a list of expenses and a projection of revenues. One of the benefits of franchising is that there’s a history of the expenses and revenues of other franchisees in the same business. It’s one of the key advantages of franchising to know this information.
We are transparent about the financial performance of our franchisees, which is why we include an Item 19 in our annual franchise disclosure document (FDD). Franchising usually involves royalty fees — a percentage of gross revenues paid regularly to the franchisor. Royalty fees make franchisee training and operations support possible and contribute to promoting the brand, which benefits every franchisee. If you chose to open a non-franchised business, you still have these expenses, but you also have the responsibility for this work.
Have Adequate Financing?
Another part of your business plan is deciding how you will finance the business. If you don’t have the right amount of money to launch and run the business, your time as an entrepreneur will be short-lived. You can self-finance or draw from other sources such as:
- Traditional loans from banks and other lenders
- SBA-backed loans from the U.S. Small Business Administration
- ROBS – Rollover as Business Startups using retirement funds
- Sometimes franchises will also offer to finance (FCI offers financing for a portion of the initial franchise fee)
Having been in the franchising business for 34 years, we spend a lot of time with prospective franchisees to ensure they have the appropriate level of financing.
How Franchise Training Supports Success
Every person who starts a business needs training in some areas. Even if you have an industry background for the business you are looking to open, owning a business is always different that working in a business.
Franchises often promote that no experience is required to become a franchise owner because training is provided. That is certainly true at FCI where we have an extensive franchise support process covering everything from product knowledge to quoting jobs to hiring employees. We also provide performance analytics that guide franchise owners in where they are excelling and where they could use additional support.
The franchisor team is also one of the critical advantages of franchising, as is the peer support of the franchise network. You run your own business independently, but you have strong resources to help you make good decisions along the way. The FCI franchisor team is always looking at new training to enhance franchisee ownership goals, so the brand is flexible and adapts to new opportunities. If you’re not current with products, suppliers, marketing techniques, and reporting systems, you open the door for competitors to scoop up business that could have come your way.
Preventing Risk with Franchise Marketing Support
Marketing is about how you build awareness of your business in order to attract customers, and it’s one of the most difficult tasks to do well. One advantage of franchising is being able to capitalize on proven marketing tactics with an established brand. As a non-franchised business, you don’t have that opportunity.
FCI provides both online and offline marketing support in a package that includes:
- Social media platforms
- Your own website
- SEO support
- Lead generation campaigns
- Custom-printed marketing materials
Marketing is what drives revenues in your business and is a major component of your business plan. Franchising eliminates the trial-and-error period of marketing tactics with people dedicated to this specific aspect of revenue generation.
Think About Retirement from the Start
While your focus at this stage may be on starting a business, part of your financial plan could include an exit strategy from the business. Often the sale of the business becomes a retirement nest egg, so it’s an important element to consider. Another of the advantages of franchising.
When you own a franchise, you have an easier path to selling your business. There’s a network of other franchisees who may wish to add another franchise to their portfolio, and the franchisor can also assist with an ownership transfer to a new franchisee who’s looking for a turnkey operation.
With a franchise, you’re adding to your sellable investment every day.
Starting a Floor Coverings International Franchise
Floor Coverings International knows the value of a well-prepared franchise owner. This is why we invest so heavily in franchise support; not just to launch the business, but throughout an owner’s FCI career. The franchisor-franchisee partnership is one franchising of the benefits of franchising, and we don’t take that for granted.
The Floor Coverings International franchise is a rewarding business model, and we encourage you to take a look at what we offer in our franchise package. You can easily request franchise information for a look at our competitive advantages and startup costs. We’ll follow up with a short conversation to answer any questions and see if FCI is a good fit for your goals as an entrepreneur.