Is Franchising For You?
Franchises are becoming extremely popular in the world of business and majority of businesses you come across are likely to be franchise owned.
A franchise simply is an agreement between two parties which allows the franchisee to market the product or service using the trademark and operating methods of the franchisor.
Many businesses are adopting franchising as their growth model and you will need to spend time getting to know the franchise industry and the opportunities to find out which approach is best for you. Franchising allows you to start up and run your own business without having to start from scratch. A good franchise will give you a proven business format with continuing support as well as guidance on financial planning relating to pensions and what a franchise should do if illness occurs and you need cover.
Business format franchising will provide you with a robust business model. Your franchise will work under the brand established by your franchisor and use the business system already in place within the marketplace. You will also need to pay an initial fee to set up the franchise which allows you to use the brand that is established. You will also have to pay continuing fees for ongoing support that will help you to operate and build the franchise.
You will gradually build a capital asset that you can then sell. Comprehensive research needs to be one of the first steps taken within the journey to owning a franchise. When franchising does go wrong, it is mainly because the franchisor and the franchisee have not taken the correct measures to make sure the match is exactly what they are both looking for. By not rushing your research and taking your time can be an easy way for you to have a successful running franchise.
If you want to go into franchising being fully informed about it and know how to own and operate a business successfully, a good place to start is by taking the bfa’s Prospect Franchisee Certificate.
Advantages of Franchising
- Less Risk: There is less risk owning a franchise, as it reduces the risk of business failure. This is due to the business already been tried and tested in the marketplace. Only 7% of franchise owners fail within the first three years compared to over 90% of new business start-ups.
- Competitive Edge: Franchising allows you to consider yourself as a small business owner yet you are competing with bug businesses and a franchisee can take advantage of economies of scale.
- Training and Support Available: With the help of the franchisor guiding you through the business start-up, you will receive training from the franchisor to help you learn how to start up a business within a short period of time. As a franchisee, you will have the benefit of management experience of the franchisor.
- No Experience is Needed: You do not need any previous experience is business to start up a franchise as all the training and information needed is provided by the franchisor. Because the franchise will already be well known in the market with a recognised name therefore the franchisee will go straight into operating the business.
Disadvantages of Franchising
- Lack of Independence: With the business already being defined with strict agreements on how to run the business, not everyone would be happy to run a business like this. If you are buying a licensed franchise you will have little freedom to do your own thing and majority of the time the same rules apply to everyone and the business is laid down in manuals.
- Reputation: The business will have a reputation on the market that you as a franchisee will have to meet the expectations of. Each franchisee affects the reputation of the whole system depending on the performance therefore, any franchisee can harm the reputation of all outlets in the chain even international chains.
Running any business can be hard work but if you have the commitment to succeed then a franchise may be an option for you. There are never any guarantees but a franchise can lower the risk of failure that comes with the start-up of any new business.