So you want to have your own business. Good for you. The world needs entrepreneurs willing to risk their time and money on new ideas. However, the sad truth is that even with bright ideas and enthusiastic entrepreneurs, most businesses they start fail within the first two years. Take heart though, all is not lost. It is possible to own your own business and dramatically increase your chances of success.
What is this miracle of modern business? The answer is the franchise.
What is a franchise?
Now, before we go any further, let’s clarify what a franchise is (and isn’t). A franchise is not just the right to use a brand, although the brand will be a crucial part of the deal. No, a franchise is much more than that. A true franchise is a complete business system, encompassing all aspects of how to operate the business. This will include:
• products or services offered for sale,
• the methods for delivering those products and services to customers,
• marketing and promotion,
• deal with customer complaints,
• billing and credit control
and any other operations and processes necessary to operate the business.
The business system will be combined with the training and support provided by the franchisor to the franchisee and their employees. It is this trinity of recognized brand along with business systems and training and support that together characterize a true franchise.
In this way, a franchise is like following a recipe. The franchisor will already have the recipe to create and manage a successful business. If the franchisee follows the same recipe, the franchisee should also end up with their own successful business. By replicating the tried and tested business model of the franchisor, the franchisee dramatically increases their chances of success compared to operating as an independent business.
A tried and tested model
In an established franchise network, the business model will have been tested many times, not just by the franchisor, but by dozens of other franchisees. This means that the franchisor will also have the opportunity to collect key performance data from their franchisees. In turn, this allows the franchisor to establish benchmarks that will serve as early warning systems, identifying potential problems in a franchisee’s business before they become significant problems.
Of course, the franchisor is not going to share your secret recipe for free. The trinity of branding, business systems, and training and support comes at a price. Typically, this will include both an initial license fee and ongoing management charges calculated as a percentage of billing. These fees mean that buying and running a franchise business is more expensive than setting up an independent business. However, higher upfront costs may turn out to be money well spent in the long run, particularly if the alternative is a significantly higher risk of business failure.
Let us conclude on a note of caution. As with all recipes, some are tastier than others. It is vital that before investing in any franchise, the franchisee thoroughly researches the industry as well as the specific franchise network they are considering joining. Buying a franchise can be a fantastic business opportunity, as long as the franchisee approaches it with their eyes wide open and fully understands what they are dealing with.
