Advantages of Franchise Ownership
You can start a business on your own without involving anyone else but the risks are always greater with a start-up. A staggering 55% of new businesses fail in the first year, which shows how difficult it can be to launch a start up in such a competitive marketplace. What makes your brand unique, what is your USP? What kind of team do you have behind you? Do you know your target audience well enough? It can take a huge amount of time, energy and investment to get a business off the ground and even the hardest working person cannot always guarantee success.
It is worth noting that only 1% of franchise businesses fail each year. This explains why more and more people choose to be their own boss within the comfort zone of a proven effective business model, such as a franchise, and the statistics prove this!
With franchising, the risk of failure is greatly reduced. Someone has already done the work establishing the business, has ironed out the wrinkles, and has gained the experience needed. The franchisor is prepared to share their expertise with franchisees and provide them with tools, in return for a financial consideration. Basically, a franchise is a way to faster, cheaper business ownership and success.
Starting a new Franchise Business can be daunting but a comprehensive business & marketing plan can make the process more enjoyable and successful in the long term.
The first step is to decide what kind of business would be the most suitable. The internet means there has been a growth in online companies so that could be a possibility, especially for a specialised retailer. Other options could include looking at a franchise operation or setting up a business in a field that is already familiar & you might have experience in.
Once the type of business sector is decided on, the next step involves conducting market research. Research possible competitors (SWAT) in the area can help prevent possible financial problems as well as allowing you to ensure you charge a realistic price or fee for goods and services. Research can also test the viability of a business start-up idea, for instance there may be little demand for a Gardening business if there already a high number of successful companies in the area offering the same service.
A business & marketing plan can be a useful way of ensuring that you have a realistic idea of how the company is going to progress as well as identifying any possible marketing opportunities. More importantly it can also ensure that a business stays on track as often the day-to-day running of a business can deviate from the original long-term plans. A plan is also a critical document for possible investors or presenting to banks when applying for start-up capital.
Unfortunately finance can be a barrier for many new small businesses, especially if they are facing direct competition from well established and larger firms. However, there are a growing number of options for start-up firms and getting a clear picture of potential finance problems at the initial stages can help ensure capital is still available if sales are not aligned with original forecasts.
Working for yourself and starting your own franchise business can be highly rewarding but can also be very challenging. With the correct approach & commitment, you will be sure to enjoy a number of benefits of being their own boss.
Although, like anything else in life, there are pros and cons involved, the benefits of franchising outweigh the disadvantages. Obviously no business partnership should be entered into without due diligence, but the typical franchise system has many advantages that suit budding entrepreneurs nicely.
Advantages of Buying a Franchise
- The business has already been proven to work, and the network of busily trading franchisees is testimony to that. The franchise has been in action long enough to demonstrate consistently successful results, which should be fully documented.
- Franchisees are given full initial and ongoing training, which helps them to set up, develop and run the business to the best of their ability. Sometimes their business partner and/or key staff receive training too.
- Working with an established brand can generate instant customers who have used it before. Getting a loan from a bank can also be easier when you are part of a well-known brand.
- You are your own boss. You can escape the frustration and politics of answering to someone else, and benefit directly from the hard work they put into a business. Plus they have greater control over how they live their now flexible life. For example, it is possible for a franchisee to work from home and spend more time with your family.
- The franchisor helps to find a good location that will deliver traffic if that’s what is needed (e.g. for retail or food outlets) or that will be cost-efficient unless visibility is not paramount (e.g. for cleaning or home improvement businesses).
- Marketing tools and ad campaigns are provided both nationally for the brand and locally for individual branches. The majority of franchisors also help franchisees make major local impact with a publicised launch of the business.
- You receive ongoing support, delivered via phone, a company intranet, newsletters, regular visits, regional meetings, annual conventions and more. They can rest assured that they are not alone. The franchisor wants the franchisee to succeed and will therefore provide the necessary support and advice to make this happen. Some franchisors even employ a Franchisee Manager to assist franchisees with any day-to-day queries that may arise.
- Centralised purchasing is a feature of many franchises where the franchisee benefits from discounted pricing on supplies such as goods for a retail store or ingredients for a restaurant. This is because the items are being bought en masse.
- With close to 1100 franchise systems active in the UK, there are many different types of franchise opportunities available, ranging from micro businesses and low-cost investments to something more substantial. For franchisees not ready to leave their day jobs, there are plenty of offerings that require only a part-time commitment that could grow into full-time gradually. Ambitious entrepreneurs, who want to totally commit themselves to owning a business, have a vast range of choices.
- For many franchisees, running a profitable business brings pride and a sense of achievement. It is a chance to prove to themselves and their communities that they can be successful.
Disadvantages of Buying a Franchise
- The franchise agreement is generally set up to benefit a franchisor. This is a legally-binding agreement. Once a franchisee has signed it, they are legally obliged to uphold its terms.
- Running a franchise means that you have less flexibility in how the business is run. Franchisors often have restrictions on how their product or service is run, opening hours or which suppliers are used.
- The franchisor dictates how much is spent on costs such as advertising or technology so there is little room for negotiation here.
- The reputation of a franchisee’s business depends on the brand’s reputation overall. If one franchise performs poorly, this can affect other franchises across the country.
- It is up to the franchisor to determine whether your franchise agreement is renewed. Common requirements for renewal include paying renewal fees on time, letting the franchisor know of your desire to extend in good time and doing everything expected of you in the franchise agreement.
The franchise industry has proven to give entrepreneurs a better chance of success than starting up a business alone. No franchise industry sector can guarantee success – hard work is needed to help your business succeed. Buying a franchise is a big step and one that should not be undertaken lightly. Do your research about the franchise you are interested in, get as much information and guidance as you can before committing to a franchise agreement. If you’re interested in being your own boss, with the support of a proven business model, a franchise opportunity would definitely be something to consider.