Daycare franchise opportunity: What to consider before buying daycare nurseries

/ Posted By - Bradleys Accountants / Categories - Advice for Small Businesses

Opportunities for driving a new revenue stream are varied, and the sky’s the limit in terms of which idea to pursue. For instance, if you prefer testing the water with the responsibilities that come with owning an established brand and business model, franchising is ideal for you.

In theory, a franchise owner acquires a model that’s established in every aspect, from branding to pricing to a ready clientele.

Pick any domain – business services, automotive, property, fast food restaurants – as a franchise owner you can reap the benefits of an already setup brand with not only a popular service or product but also an excellent reputation.

But did you know you can also buy a franchise of a daycare nursery in the UK if that’s more like your cup of tea.

Some of the well-known childcare franchises include Monkey Puzzle, Kiddi Caru, Banana Moon, Fennies, and Busy Bees. Each provides extensive training, marketing support, and business development assistance to those purchasing their franchises.

Perhaps the biggest benefit of franchising daycare nurseries or any other brand, as matter of fact, is that one gets to operate under a tested and successful business model.

Owning daycare nurseries or just one is brilliant but …

There is a flip side to every coin. Franchising gives less control of where, how, and for how long a franchise business can be run.

There are guidelines in place to ensure consistency in the services offered, which can be troubling for franchise owners who want to enjoy the flexibility of scaling the business – their way and at their pace.

Moreover, many franchises are launched even before they’ve had the chance to test and prove their business model, which results in a lot of failed franchisees—regardless of the sector in which they’re operating.

Therefore, the bottom line is you should do your homework before you purchase a daycare franchise. Here are seven factors to consider before taking a decision:

1. Daycare franchise costs

Don’t be surprised when we tell you 20% of small businesses shut down within the first year of operating because of inadequate cash flow? So, if you don’t have enough capital to start a daycare franchise, it is best not to purchase one because the buying cost is just the tip of the iceberg.

As a franchise owner, you will also have to bear expenses to set up the inventory, hire resources, and market the business. It’s shocking but true that the money runs out faster than imagined when you run a business.

Therefore, you should have sufficient working capital to scale your franchise until it becomes profitable. Talk with the franchise business for their view on anticipated costs for the first few years to ensure you have a clear understanding.

It is often possible for the franchise to obtain lower-cost inventory and supplies through the franchisor of daycare nurseries. That is the result of the group purchasing power of all franchises, which means you can negotiate pricing for everything you need at significantly lower levels than you could achieve if you were an independent business owner.

2. Your skills and talents

If you want to open a daycare franchise, then you must be ambitious, enterprising and more importantly, willing to follow the guidelines set by the franchisor.

To become a daycare franchise owner, you have to take a giant leap of faith; but it also requires you to possess business skills such as project planning, conflict resolution, and time management that your franchise business can benefit from.

Do you possess the right skills to scale a daycare franchise successfully?

If you are unsure, don’t buy one.

How much do you know about the legal requirements to run a nursery? Do you have the right amount of experience and qualifications required? You will need at least two years of experience as a qualified nursery nurse and have worked in a supervisory role for one to two years. You will also need a relevant nursery qualification. Do you have the funds to hire qualified staff and do you fully understand their training and experience requirements?

Identify your strengths and shortcomings, and then make a decision.

3. Product or service demand

You could be experienced in providing daycare nursery services yet live in an area of operation that has many daycare nurseries already offering their services at competitive rates.

Therefore, before taking a decision, find out if the franchisor’s offerings will attract footfall to your business in the neighbourhood in question. If not, your franchise business will fail because the market for what you want to sell has saturated.

Other factors to consider are if the demand for your products or services is consistent or personal, and how rapidly will that demand increase in the future. As a franchise owner, you should strive to satisfy a need, solve a problem, or leverage a trend.

4. Competition

It takes courage and perseverance to run a successful daycare business, and franchising is no exception. What most franchise owners don’t know is they must prevail against the strengths and resources of their key competitors, and to do so, they should study them.

Find out how long your competition has been in the business. Get information on the scope of their operations and the marketing initiatives undertaken by them. Look into whether they have any weaknesses that you can capitalise on.

Google Reviews is a great tool to find out what parents think about the daycare. Do your due diligence before buying a daycare franchise.

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    5. Brand name

    Most franchisors of daycare nurseries offer training programs for strengthening the skills of their franchisees, which include essential business functions such as accounting, customer experience, operations, technology, and marketing.

    Depending upon the franchisor, you will continue to receive ongoing and online support, along with exclusive alerts and continued education.

    Additionally, as a daycare franchise owner, you get the opportunity to share and absorb invaluable advice and knowledge from other franchisees operating in different geographies.

    With the help of such training programs, you can climb a very steep learning curve in a short period. Therefore, identify the level of training and support the franchisor of daycare nurseries provides. Before finalising a franchise, ask its current franchisees if they find the training to be satisfactory.

    6. Training and support

    Most franchisors of daycare nurseries offer training programs for strengthening the skills of their franchisees, which include essential business functions such as accounting, customer experience, operations, technology, and marketing.

    Depending upon the franchisor, you will continue to receive ongoing and online support, along with exclusive alerts and continued education.

    Additionally, as a daycare franchise owner, you get the opportunity to share and absorb invaluable advice and knowledge from other franchisees operating in different geographies.

    With the help of such training programs, you can climb a very steep learning curve in a short period. Therefore, identify the level of training and support the franchisor of daycare nurseries provides. Before finalising a franchise, ask its current franchisees if they find the training to be satisfactory.

    7. Expansion plans

    By deciding to scale a franchise actively, you have embraced the risks that come with business growth. When researching franchisors of daycare nurseries, choose a territory that has potential for expansion, where there is a demand for your offerings or where circumstances indicate a likely increase in need for the services. For example, a new estate being built will generate an instant new demand for services.

    The key is to identify the scalability opportunity for your daycare franchise business. Try to find out how the sales can be driven and whether your franchise competitors operate in the area.

    8. Risk mitigation

    No doubt running a business is not free from risk. However, one of the most significant advantages of purchasing a daycare franchise is ironing out most of the wrinkles and minimising the risks – all thanks to the franchise owner’s tried and tested business concept in the marketplace.

    Make no mistake, you still have to do the work; but when you become a franchisee, it is easier to ascertain the future and take precautions accordingly to mitigate any risks that may arise affecting your daycare business.

    9. Pooled advertising resources

    Advertising can be an expensive and daunting activity. That’s why many franchise systems offer national/local advertising campaigns, included in the franchise fee.

    The pooled resources together means that the franchisor can optimise campaigns as a whole, and understand the ‘key drivers’ of the target audience, which assists the franchisee through economies of scale.

    Additionally, with this type of setup, you only have to focus on selling the products or services and reap the benefits of having an experienced parent company that takes care of marketing and advertising. This is far less stressful when managing a business.

    Endnotes

    Before buying a daycare franchise, please do a rigorous evaluation of the franchisor in question, your skills, and financials and the health of the market you are looking to operate in.

    Franchising is a life-changing opportunity and ideal for those driven professionals who want to hit the ground running from the first day. So, what are you waiting for? Sharpen your pencil and get started today.

    If you’d like to speak to an accountant that also specialises in managing accounts of daycare nurseries, contact Bradleys Accountants today.

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