Is This Your Year to Start a New Franchise?

If we believe the various surveys, at any one time around 10% of working-aged people have plans to start a business. In fact, the number of new business entities registered in Australia increased by around 20% in recent years, well above the historical average. This might seem strange given the labour market remains tight, inflation is still on everybody’s mind, and interest rates continue to be a talking point. So with all of that in mind — is now the right time for you to start your new franchise?

The honest answer is probably it depends. But hopefully we can help a little with your decision-making process.

Whether you’ve had enough of your boss and their unreasonable demands, you’ve sat on a long commute one too many times, or you just know deep down that you were destined for something else — there comes a time where you might think: That’s it, I’m done. I’m going out on my own. If that time is upon you and you think a franchise might be the way to go, then like every other new business venture, it pays to do your homework and ask yourself some tough questions.

Ask yourself: Why?

Why do you want to start a business? Why this business? Why this franchise? What motivates you?

Franchise or not, starting a business is hard work — in fact, it can be much harder than working for somebody else. There’s likely to be more stress as you deal with every aspect of the business, from finances to HR. You might have to work longer hours, particularly in the beginning, and there are bound to be stumbles along the way.

When you choose the right franchise for you, it should align to your skills and experience, your passions, and your values. Your “why” is the foundation upon which your business and your future will be built. To quote Simon Sinek: “People don’t buy what you do, they buy why you do it.”

It’s no coincidence that “why” is one of the first questions lenders ask when a potential new franchisee comes in for finance. Why matters.

Key takeaway: Your motivation is the foundation everything else is built on. Skills can be learned and finances can be arranged — but without a clear and genuine “why,” the hard days will be much harder to get through.

Ask yourself: Who?

Who is your potential customer? What will make them become your customer?

No matter what industry you’re in or what product you sell, customer understanding is key to building your business. Without a clearly defined target market, you might waste thousands of dollars getting your message in front of people who will simply never buy what you do, no matter how well you do it.

A clearly defined target market means you can more easily answer the question: Will I have enough customers to make this business work?

Here’s a simple example: a suburb where lawns are rare but dogs are everywhere. Lawn mowing and dog washing have both proven to be viable franchise businesses — but one makes a lot more sense in that location than the other.

Ask yourself: How will you compete?

A deep understanding of your competitors will help you pinpoint their strengths and weaknesses, and hopefully lead you to understand your own unique selling proposition. Building an in-depth profile of your competitors should be one of the earliest stages of your business planning process.

Stalk their social media accounts, figure out who they target and how, look at their technology platforms or online presence. Buy their product or service if you can — take their customer experience for a test drive. Set out what’s similar and what the key differences are between their business and your planned one.

Ideally, you want to be able to explain to a potential customer, clearly and succinctly, why they should choose you instead of them.

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Know your numbers

Glaring omissions or errors in financial forecasts can spell doom before your doors even open. Many businesses run out of capital before they even get to that point — ending up starting late or not at all.

Work with your franchisor to understand any financial modelling used for the business. Check every input. Are those customer numbers realistic? Is that what your rent will actually be?

Remember that profit and cash are often two very different things, so make sure you have both a profit and loss forecast and a cash flow forecast. Consider different scenarios and prepare yourself with a worst case — not just a best case. It’s very common to overestimate revenue and underestimate expenses, particularly in the early days, so make sure you have an appropriate buffer to see you through.

Tip: A profitable business on paper can still run out of cash. Make sure you forecast both your profit and loss and your cash flow — and stress-test them with a worst-case scenario, not just your best guess.

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So is it the right time?

Some of you will have started reading this thinking: Just tell me if the time is right!

Well — if you’ve done your homework, asked yourself the big questions, selected a franchise network you’re passionate about that fits your skills and experience, analysed every aspect of your business-to-be, made your plan and tested every aspect of it… then yes, it’s the right time.

Here’s why. The current economic climate — inflation, interest rates, labour demand — is everyone’s economic climate. You share it with your customers, your competitors, your supporters, and your suppliers. Your new business will exist alongside others of a similar nature that pay similar amounts to achieve similar things. Sure, some businesses do better under certain circumstances than others, but you’ve already tested and re-tested all of that in your planning, right?

When someone starts their business on the back of a sound, well-thought-out plan — backed by an unflinching determination to succeed — rarely will they fall. And if they do, they’ll almost always get right back up again.

If that sounds like you, then there really is no time like the present.

The bottom line: The right time to start a franchise isn’t when the economy is perfect — it’s when you are prepared. Do the homework, ask the hard questions, and back yourself with a solid plan. Everything else is just weather.