The Importance of Capital in Franchise Business
What is the importance of Capital in the franchise business? The answer refers to the funds that are needed to start any type of business including franchise business.
The importance of capital is to keep the business operating and growing…
What are the sources of Capitals in Franchise Business?
In general, the major sources of capital for a franchise business is the personal investment by the owner or owners.
As well as the sale of stock to investors, profits from the sale of products and services, loans borrowed from banks and other financial institutions.
Moreover, the entrepreneurs who accept the franchise opportunities and risks involved in creating and operating such a business.
For example, the Dominoes Pizza franchise needs capital to pay for its annual membership costs, all the products from the main company, paying salaries, and more which run into a certain amount of dollars each year.
Sources of Capitals In Franchise Business
- Financial Capital
- Human Capital
- Goods
- Productions
Financial Capitals in Any Franchise Business
No matter what type of business you are planning to establish, you still need some financial capitals, unless you are planning to open an online business.
With the franchise business, you know approximately how much you have to pay to get your franchise business.
So, based on the given information about your choice of business, you can invest and put enough money into the franchise business.
However, you still need a good amount of capital for labor salaries, thefts, utilities, etc.
Important Of Human Capital in Franchise Business
In general human capital and financial capitals are co-related to grow your business.
Human Capitals + Financial Capitals = Business Worth
It is very important to make sure that the human capital of your business are all qualified and well trained to do their job.
A good relationship between the owner and the team makes a significant result of profit in any type of business.
When employees are happy, they are willing to work better and as a result, you will sell more and gain in financial capitals.
Saying that when you gain in financial capitals the economy will increase automatically as well.
However, you should always try to build a very friendly team that can grow with your business.
The characteristics of good managers are, that they will be flexible with the employee’s schedule with enough hours.
The old ways of managing and insulting employees are over and based on the nature of the job, the labor-management should be flexible as well.
For example: If you are running a franchise business in fast food services, you can’t schedule a person with young children to start for breakfast time since he/she might have to drop off the children to school.
Instead, you can just schedule the fit person to fill out that shift of the day.
The business will lose a minimum of $60,000 if they lose a well-qualified employee who’s already trained and expert at what he/she is doing.
Because, by the time you hire a new employee and start training and gaining the same experience level as the previous employee, you are losing a lot of money.
Goods to Operate in Business
This part of the operating system in the business is referred to as the goods in any type of business.
For example, a good quality networking system and the fast internet can make the business operates faster with confidence.
People judge businesses based on their appearance and quality of their services. We all should make sure that the consumers are well treated and satisfied with our services.
Air conditioners, soundproofing, hygiene, cleaning system, heating systems, and so on, are very important for success in any business.
Importance of Production in Any Business
Good quality of services is very important in any type of business including franchises.
Speed and quality at the same time are some of the ideal points of a successful business to compete with competitors.
Every entrepreneur I’ve ever met who’s developed something truly innovative has the same recurring nightmare: that someone else will beat them to the market with their own concept. And often these fears are based on reality.
The problem is that opening a single unit takes time. For some entrepreneurs, franchising may be the only way to ensure that they capture a market leadership position before competitors encroach on their space, because the franchisee performs most of these tasks. Franchising not only allows the franchisor financial leverage, but also allows it to leverage human resources as well. Franchising allows companies to compete with much larger businesses so they can saturate markets before these companies can respond.1
Who Is Entitle to Run a Franchise Business?
The qualified manager who spent years operating such a business is the most entitled person to run a franchise business.
There are always a few years of experience in working at the management level is the main requirements to be qualified for any type of franchise business.
A great qualified manager who is at the level in which he/she can operate the most important parts of the business such as budgets, human resources, training, quality control, etc is the best option.
Moreover, when you can increase the main capital within a short period, you consider as an entitle business manager who can run a successful franchise business.
The goal of Growing Your Capital
The main purpose of any type of enterprise is to gain capital and as a result, increase the main capital.
A company must have to make sure that they have enough capital to start up the franchise business and that fund can cover all the expenses until the business starts making profits.
Main capital is like planting a seed and wait until it grows by itself and as a result, you’ll pick all the goods and by selling them you’ll add all the funds to your capital pool.
Different Ways of Growing your Capital in Franchise Business
If you are planning to grow your capital in franchise business you should go through several steps:
- A good business plan based on your goal
- Build your brand or product
- Hire a lawyer
- Accounting and payroll system
- Plan the training process
- Find the right human capital
- Location
- Plan your goal
- How you are going to support your franchisees
- We organize and cautious
A Good Business Plan
To start any type of business we need a good business plan based on the goal of how we are planning to grow our capital.
To write a good business plan, you can always hire an expert to write your business plan based on your budget and product or services you are planning to offer.
This type of franchise business can be one of the following franchise opportunities:
- Brick and mortar Business Franchise
- Home-based Franchise
- Service Franchise
- Vending machines Franchises
- Online business Franchises
I do suggest starting your franchise business based on your expertise and knowledge in that type of industry to be able to grow your capital in the franchise business.
Types of Franchise Business
1- Brick and mortar business franchise
Requires more capital to start with because you need a physical location, physical materials and more human capital to start your business.
An example of brick and mortar business is McDonald’s, Tim Hortons, and Starbucks coffee, where you need a good location with a minimum space requirement.
2- Home-based franchise business
It can be in 2 different subcategories:
- Physical Service providers
- Internet-based service providers
The physical service providers such as carpet cleaning franchise, medical billing, safety and security service providers
On the other hand the internet-based service providers, such as virtual secretaries, and helping small businesses…
3- Service based franchise business
In this type of business which you can grow your service branches with other peoples’ money and start selling your franchise businesses.
An example of that type of business is:
- Catering business
- Mobile Hairdressing and beauty services franchise
- Training services
- Health and home care services such as senior and handicaps service providers.
4- Vending machine franchise business
You can invent your brand of the vending machine and start your franchise.
It could be a type of healthy food, snakes, drinks or cannabis-based on the ID of the buyers.
5- An online franchise business such as Digital marketing, leverage business, radio, and online businesses.
If you are looking to grow fast your capital in a franchise business, an online business franchise is one of the best and fast-growing opportunities if you know how to do it.
You should have a piece of good knowledge of Search engine optimizations and how to bring good traffics to your website to make them buy your products and services.
This way, you will get the most out of your capital, because to run an online business franchise, you don’t need a big investment and capital.
If you need more information about that type of business franchise click here.
Build Your Brand or Product
You should have your brand be able to franchise your business.
That brand should be unique and registered with the trademarks.
The reasons for registering your trademarks are:
- Shows that trademark is belongs to you.
- It gives you exclusive rights to use your trademark across the world or your country based on the type of trademark you picked.
- Stops others from copying your products
- It helps you with the licenses to make more money and increase your brand’s popularity.
- People come to know you and your brand.
Hire a Lawyer
There are always competitors and problems in any type of business with consumers and/or other organizations and to protect yourself from such things it is better to hire an attorney.
Your lawyer can take care of all legal documentation and signatures, so you can have a clear mind with the legal part of your business.
Training Plan and Documentation
Based on the type of franchise business you’re planning to run, you should always prepare the documentation and training system.
In some companies they spend between $70,000 to $160,000 to just prepare the documentation and training manuals and all of those costs should be able to cover with your capital to start up your business.
Human Resources
For sure human resources or human capital is the most important part of any business and we have to make sure to pick the right people to run such a business.
In general, people in management levels are entitled to be able to approve to run a franchise business since they are familiar with the business mechanizes.
Moreover, the minimum experience required is two years of working at the highest management level with decision-making authority to be qualified to own a franchise.
Right Location
Location, location, location is the most common word in the business industries.
Based on the nature of the business, we should know that type of franchise will make the most profit in what type of locations or spots.
If you are planning to establish brick and mortars business, for sure you have to make sure that your franchisees’ location of the business is at the right location.
Although for home-based franchise business the location is not physical, it is very important too.
For example: If you’re planning to have a daycare you should have a certain policy about the location and environment safety of the children which the franchisees should respect.
However, when you are running an online franchise business you have location freedom and this is one of the advantages of running an online business.
Supporting Your Members
One of the most important parts of any business is the members’ supporting the system of that company.
I think everyone should read all the reviews about the companies supports system before they do sign up or sign with the business.
Imagine, you started your franchise business and somehow you are having a problem and all your business stuck because of waiting in the ques of the calls for hours!
It is better to have a good and well-trained people for just supporting the members.
By doing that, you can show them your support and care. As a result, you will get more sales and multiplying your capital in a franchise business with success and a good name as well.
Get a Loan as A Capital in Franchise Business
Usually is not a good idea to start your franchise business with a loan especially if the interest rate is high.
It is better to have some capital to start up from your savings, etc that you don’t have to pay any interest until you establish your business and able to run it for the first year.
Although, if you don’t have many choices, you should make sure the interest rate and the terms are reasonable and you don’t lose anything from the capital.
However, the importance of capital in a franchise business is significant and the goal of growing your capital should be the target and make sure you’re following the plan to succeed in your business.
