Is franchising right for you?
Right, so you’ve made the decision to start up your own business. Great, but now comes the difficult part. This is the time you need to start putting your ideas into action.
As you are looking at this website you are clearly considering investing in a franchise. For the right person franchising is a great route to owning a successful business but, like many things in life, different people suit different things and franchising might not be the right choice for you.
If you are not suited to franchising but go ahead anyway it could result in you wasting a lot of money, time and energy. To help you assess if franchising is right for you here are a few aspects of owning a franchise that you need to take into consideration:
Safer business option
Franchising is often considered the safer route to owning your own business. One of the reasons for this is that the business model is already tried, tested and proven before the franchisor begins to franchise the concept, meaning that the franchise owner does not have to worry about whether the model works, but instead can concentrate on establishing their business.
As well as this many banks acknowledge franchising as a safer way to set up a business and will be more willing to provide loans to those wanting to set up a franchised business rather than an independent one.
Unlike an independent business owner a franchise owner does not have as much, if any, control over the business model. Although the franchise owner is responsible for the day-to-day running of their business, everything from the products and services provided to the interior design of stores and restaurants is decided by the franchisor. Although some franchisors are willing to listen to ideas put forward by franchise owners, as part of the franchise agreement the franchise owner will have agreed to follow the business model exactly.
This means that for people who aren’t keen on following an existing business model and who want to implement their own ideas and have complete control over their business, franchising is probably not the right business option.
Continuing franchisor payments
When looking at franchises, potential franchise owners should keep in mind that the initial investment fee does not cover the entire business start-up costs. Sometimes, especially if a premises and fit-out is needed, the start-up costs can be quite high. On top of this, all new franchise owners will need money to support them through their first year of trading when they probably won’t be making much, if any, profit.
Additionally, many franchisors require franchise owners to pay a yearly fee to cover ongoing support, marketing and training. Alternatively, they might take a percentage of sales or turnover.
Established brand / marketing support
Part of the appeal of owning a franchise business is that you are buying into a trademark that is already well known. Some brands, such as McDonald’s and Domino’s Pizza, are recognised worldwide, whereas others are well know at a more localised level.
Not every franchise on offer will be instantly known however, although some will be established within their specific sector and others will often be recognisable but not instantly known.
As a lot of people will prefer to do business with names they know and trust, trading under a familiar brand name benefits franchise owners because they are able to attract customers from day one, instead of spending time establishing a good brand reputation.
On the flip side, the franchise network is only as good as each franchise owner; so if a franchise owner provides a poor service to one of their customers that same customer would probably be unwilling to use the same brand in another area. Now with social networking sites, the same customer might also tell others about their poor experience, which could have a knock on effect with all franchise owners within the network.
Restriction with suppliers / stock
Some franchise owners have found that the franchisor restricts who they can use as a supplier, which can result in them having to pay more for equipment and stock when they know they can get them cheaper somewhere else. If you have any doubts, this is something you should look into when researching your chosen franchise opportunity.
If you are the sort of person who will want complete control over your suppliers and what you stock you should perhaps think again about whether franchising is the right option for you.
One of the main advantages of owning a franchise is the ongoing support you get from the franchisor and other franchise owners in the network. Many people going into business by themselves often report that at times they get lonely, however being part of a franchise network means that you have constant contact with like-minded people.
Every good franchise will offer its franchise owners ongoing support, which can take several forms but usually includes telephone and internet support. As well as this many franchisors arrange for regular one-to-one meetings to discuss any problems and to help drive the business forward, and some have yearly conferences that the entire franchise network is invited to attend.
If you are thinking about investing in a franchised business then it is important that you research the industry thoroughly, as, although many people own and operate thriving franchises, not everyone is suited to being a franchise owner. It is vital that you are honest with yourself now because once you’ve signed the franchise agreement you cannot back out.
Written by Derin Clark