HOW TO BE SMART ABOUT MAKING A CAFE INVESTMENT BEFORE YOU MAKE IT
1. The Investment Before deciding on a project, it's crucial that you assess the investment needed to successfully launch and run a franchised cafe. There are going to be two kinds of costs you need to be aware of i.e setup cost and the post setup cost. The first thing to know is the total investment to get your franchise up and running. This should include the purchase costs, your opening inventory and the amount of working capital you are going to need before you break even. Understanding these costs is crucial, as you don't want to run out of money when you are on the verge of success. The important thing to understand here is that the investment required is not limited to just the setup cost. Once the operations start, the business needs to be financially supported irrespective of the value its bringing in, for at least 5-6 months so that you give the business a fighting shot to survive the existing competition. This expense involves the operational costs of the business like salaries, rent of the real estate, electricity and miscellaneous charges, inventory costs etc In addition, you also need to know how you are going to finance the business, as many people can actually afford a bigger franchise opportunity than they think.
2. What are you good at, and what are you passionate about?
You don't have to love coffee to open your own franchise coffee shop. Nor do you have to do all the work.
When it comes to running that shop, you're actually the business owner and can hire people to deliver the service or sell the products; you don't have to do all of that yourself. Success is dependent on how well you work on the business, not just in the business.
Still, not everyone is cut out to be a franchisee, to thrive within someone else's system. "Before buying a franchise, one of the most important questions to ask yourself is, “Do I have the right personality and the mindset to be a franchisee? People are all different, and so are franchises.
"As a result, one of the worst mistakes you can make is buying a franchise when you are not suited to be a franchisee, or compatible with the business."
3. How much time do you need to invest?
While starting a franchise is different from starting your own business, it is still a business, and you won't be the first person who's traded a 10-hour-a-day job he (or she) hated for a 16-hour-a-day job he hates.
So, make sure you understand what's involved. There are seasonal franchises that require you to work especially hard at certain times of the year; but it's still your business that you're going to be running, and you need to be clear about how much time you will need to invest to make it a success.
4. What is the franchisor like?
Not all franchisors are the same, so you need to do your research and get to know your franchisor. This includes things such as how long has this company been in business. Things like how many franchise stores the brand has opened recently, etc. This can give you a clear indication on how well the market is receiving the brand.
Just because a franchisor is new doesn't mean it's not a great opportunity, but the more you know, the better informed your decision can be. Upcoming franchise brands are great to work with since they are more flexible, charge much less of a franchise fee and are dedicated to make the new store a success, owing to their need to put their brand on the map.
5. What kind of help does the franchisor provide?
When you take on a franchise, unlike starting your own business, you're not alone, and that can be a great comfort. Just make sure you know how much support you will get from the franchisor. Some brands like Cafe NYC Queens, have an entire annexure dedicated to outlining the support the brand provides and duties of the franchisee which standardizes expectations on both ends. A lot of times , the kind of support a brand provides is synonymous to the kind of contract that has been agreed upon. But more or less a franchisee will need support in the following aspects like finding location, market research, floor plan, interiors, staff hiring, staff training, recipe development, marketing plan etc
6. What's your endgame?
I am a big fan of Stephen Covey's "second habit" of highly successful people: Start with the end in mind.
This applies to franchising. Before you take up your franchise, know and understand what your exit strategy is going to be. Are you planning to leave the franchise to your children, are you looking to sell it or do you plan to just run it for a couple of years and then get out?
The better you know and understand your end game, the easier time you'll have selecting the right kind of franchise opportunity, which fits you in the short term, and supports your long-term objectives.
Running a franchise can be a great way to start running your own business, but you need to understand why you are getting into it, what you are getting into, whom you're getting into it with and of course how you plan to get out of it. The better you understand the answers to these questions, the better your probability of selecting the franchise segment and company with the best potential for you.
Summary of the article:
The type of experience required in the franchised business.
The hours and personal commitment necessary to run the business.
The track record of the franchisor, and the business experience of its officers and directors.
How much it will cost to get into the franchise.
How much you're going to pay for the continuing right to operate the business.
If there are any products or services you must buy from the franchisor and how and by whom they are supplied.
The terms and conditions under which the franchise relationship can be terminated or renewed, and how many franchisees have left the system during the past few years.
The financial condition of the franchisor and its system.