A franchise is a business model owned by one or more people who sell goods and services under a parent company’s branding and business knowledge. The arrangement involves a franchisor and a franchisee. The franchisor establishes the company’s brand name, trademark, and business systems and contractually permits the franchisee to use them. On the other hand, the franchisee pays upfront costs and licensing fees for the rights to operate under the franchisor’s name and system.
Ideally, franchising allows business owners to run ready-made ventures with branding and processes in place. If you’re looking to invest in a sports franchise, here are six basic steps to follow:
Research the franchisor you want to partner with
Research franchises available for sale and how the franchisor works with franchisees to determine if it meets your business goals. Notably, a good franchisor will exhibit the following characteristics:
- Has excellent sales records and thus proves to be highly profitable
- Is socially responsible
- Doesn’t have too much local competition that may break your business
- Has a growing customer base
- Offers adequate support to franchises, for instance, critical business functions, such as marketing and inventory planning
- Provides opportunities to upsell goods or services if there’s a need to drive revenue
Moreover, you can use free online tools or paid market data to check and evaluate other performance metrics. Generally, the sports industry provides excellent market opportunities to grow your franchise. Based on statistics, total sports revenue worldwide was about USD$3.55 billion (AUD$5.18 billion) in 2022, and it’s forecasted to grow at a compound annual growth rate (CAGR) of 6.26%, amounting to USD$5.02 billion (AUD$7.32 billion) by 2027.
And considering the place you’re based in like Australia, which is a proud sporting nation, a sports franchise can be a very lucrative business to invest in. Before you make your decision, ensure you do your due diligence to identify a reputable and highly lucrative parent company to work with.
Determine your investment level
You may require a significant initial investment to launch a highly lucrative sports franchise. You’ll have to pay an upfront franchise fee to start the business and an annual licensing fee to have the right to use the franchisor’s trade name. Therefore, you should determine your investment level and select franchise opportunities that work well with your budget.
And if you’re short of money, consider applying for a business loan to finance your operations, especially during the initial stages. Notably, many business owners apply for financing to acquire the adequate capital necessary to start and grow a business. A recent study by Bloomberg reveals that the commercial lending market is expected to grow at a CAGR of 13.1%, reaching USD$29.35 billion (AUD$42.71 billion) by 2030.
Read the franchise disclosure document
The Franchise Disclosure Document (FDD) contains vital information about the operation of the business, including:
- The rights and responsibilities of the franchisor and the franchisee
- Products and services available for sale and how to sell them
- How to renew your sports franchise
- How to sell the franchise
- Regular business hours, for instance, 24 hours a day
Reviewing this information is essential to decide whether a specific franchise is the right one for you.
Send your application
After deciding on the right sports franchise to invest in, you can begin the application process. Though you can do it yourself, it’s recommended to seek the professional help of an attorney who can offer legal advice or assist you in filing legal documents. The essential documents required to create a franchise relationship are:
- Franchise disclosure document: It discloses specific information about the franchisor and franchisee and their legal obligations.
- Franchise agreement: It’s the official document that creates a franchise relationship. It gives the franchisee the rights and obligations to operate the franchised business.
- Operations manual: It informs franchisees of the system standards, processes, and requirements necessary to operate the franchised business.
- Financial statements: It’s used by franchisors to analyze your financial track record.
After reviewing all the documents, you can send your franchise registration applications. You can find the applications on the franchisor’s website or contact them directly. The good thing is that most franchisors invite qualified franchisees for a free discovery day to explain more about their offering. Usually, they only invite entrepreneurs who are financially ready to invest.
Attending an event like this is the perfect chance to learn more about the franchisor, what they do, and their expectations of you. And if you’re satisfied with every aspect of the franchise relationship, you can sign the franchise agreement.
Get training and support
Since you’re joining an established brand with built-in processes and following, it helps to get the necessary training on various aspects of the franchise like:
- Products and services, where to get inventory, how to sell products and services
- Payment technology used
- Marketing tactics essential for this particular business model
Essentially, with the increased number of businesses, training helps you have a competitive edge over your competitors. That’s because it equips you with the skills to analyze the market your franchise operates in and determine ways to offer more value to your customers. Data shows that between 2021 and 2022, there was a 7% increase in the number of businesses in Australia and a 19.7% entry rate.
Open your sports franchise
You can now start your operations in your chosen city or town at this stage. You’ll have to launch the business to introduce your products and services to potential customers. Fortunately, many franchisors support franchisees in marketing campaigns and other initiatives that enable them to scale quickly from the day they open.
When you buy a sports franchise, you can operate under the title of a larger and more reputable company and meet your business goals. However, investing in one can be a grueling process since you’ll have to do extensive research and prepare documents. You just have to take it step by step, and it will all be worth it in the end.