Some people are simply brimming with business ideas that they want to try out and have the mentality that failure is simply a logical step closer to ultimate success. But what if you tend to lack in the ideas department or a little short on failure busting mentality right now? Enter the franchise business!
What is a Franchise
A franchise is quite simply a business model, system and formula that has been proven to be successful, then packaged in a way to make it easily replicable by another aspiring business person. It often incorporates distinctive branding and centred around selling a specific, or range of, products or services. There will often also be something quite unique about the product, service or the way in which they are delivered or presented.
What are the advantages?
The key advantage of a franchise is that basing your new business on a proven system in theory increases the chances of success. Published industry statistics in the UK show that 9 in 10 franchise business owners run profitable businesses*. The hard work of tested, refining and proving the business model works has already been worked out in the original pilot business by the business pilot owner, who becomes the franchisor.
Other perceived advantages of a good franchise system may include:-
- Training and on going support
- Benefit from national advertising campaigns carried out by the franchisor on behalf of the franchisees
- Benefit of recognised branding and reputation
- Perceived customer benefit that you are part of a larger business network
What are the disadvantages?
A key disadvantage of a franchise business is that innovation and experimentation is not normally permitted without prior testing and approval of the franchisor. A franchise system works because its based on control and uniformity; every process and procedure you will carry out in the franchise business will have a documented way of doing it, which you must follow in order to retain the integrity of the brand. As a franchisee, you will have signed a franchise agreement which effectively commits you to following the system the franchisor dictates. However, this element of control can be a big problem and a source of frustration to some people, especially someone who is inherently entrepreneurial and likes to experiment and innovate.
Some other potential disadvantages may include:-
- Increased start-up fees due to having to pay an initial franchise ‘fee’ to the franchisor
- Depending on the terms of your agreement, you might be forced cover costs of re-branding should the franchisor decide to change it
- Your customer potential will usually be limited to a specified geographical territory
Is a franchise right for me?
Whether a franchise is right for you comes down to personal choice and much of this will be down to your personality. Someone who enjoys the challenge of forging a new business idea or is innovative in their character will often struggle to work within the confines of a franchise business. These are the type of people who usually start their own businesses and do well at it. You also need to consider the implications of being bound by an agreement that will essentially dictate what you can and cannot do with your business. For this reason, legal advice should be sought and plenty of care and attention should be given when signing the franchise agreement at the very outset of starting up a franchise business.
On the flip side, if you are a more risk averse person, the structured and controlled environment of a good, ethical franchise system can actually be a positive. It can offer a proven business system that if followed correctly should replicate the original pilot business’s success. Coupled with the on going training and support from the franchisor, it can be a good viable business start up option.
One thing to bear in mind is that, whether you decide to start up a franchised or non-franchised business, no business start up is completely devoid of risk. Be prepared to put in a lot of hard work and dedication to have the best chance of success.
*Source: British Franchise Association/NatWest UK National Franchise Survey 2012