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Why are franchises safer than starting your own business?

Owning a business and being your own boss is everyone’s dream. There are two major ways of being a business owner, namely franchising and launching your enterprise from scratch. The former dates back to the 1820s and involves having a contract with an established company to trade products and services. A product franchise means selling a product with a company’s brand name, logo and trademark. In manufacturing, the franchisee manufactures and sells products using the franchisor’s name, expertise and intellectual property.


Understanding the franchise agreement


A franchise agreement is a contract between the franchisor and the franchisee. It entails the terms and conditions and the methods of operation of a particular franchise. The duration of the renewable contract ranges from 5 years to 20 years. The franchisee pays an upfront franchise fee and regular royalties to the franchisor. Currently, there are diverse franchise opportunities in industries such as accounting, cleaning, education, management, plumbing and pet care.


Setting up your enterprise requires one to have an excellent idea, register the business, undertake planning and research as well as fund-raising. The above processes are tedious and time-consuming. In this article, we explain why business franchising is safer than starting your enterprise from scratch.


Reduced risks and faster ROI


Most start-ups take time to build a customer base reducing chances of making a profit quickly. On the other hand, a franchisor has a tried, tested and proven business model with ready consumers, hence faster cash flow. Franchise businesses are businesses that have been in existence for several years, increasing their success rate. Start-up enterprises have lower success rates due to high risks and inexperience.


Training and support


Most start-ups have to learn from mistakes and at times entrepreneurs end up giving up because of challenges in the enterprise. A franchisee learns within a short time as they work in an already successful system. Working together with a franchisor increases the chances of success as the franchisee receives extensive management and administrative training.


A franchisor offers marketing support and avails helpful information to the franchisee for the success of the business. Parent companies are continuously performing market research and developing products to improve their brand. A start-up needs lots of resources and time to research new models and ways of enhancing its concepts.


Most franchisors offer field support specialists who help franchisees in the management and leadership of the franchise. This is exactly what it means by working for yourself and not working by yourself. The online support network links franchisees to help each other in overcoming challenges.


Pooled resources and having a competitive edge


Advertising your own business to a large consumer target can be a next to impossible venture due to funds. Franchisors pool together resources of the large organisation to advertise, promote and market their goods and services on media. Creating products and services awareness means standing out from competitors and attracting potential customers, hence increasing sales.


Most franchises for sale have been in existence for decades and boast loyal customers. A franchisee, therefore, competes even with big businesses as they have an already built reputation. Unlike launching a new enterprise, a franchisee leverages on the consumers seeking the reliability of an established brand. There is wide acceptance of an already existing brand as compared to a new one.


An individual establishment may struggle to negotiate a bulk rate, unlike a franchise that purchases more and on better terms. Most franchisors negotiate with suppliers on behalf of all the franchisees, allowing them to have a solid supply chain.


Exclusive territory


Franchising a business gives you exclusive rights of working within a specified location. With a monopoly, it means no competition of the same brand which may minimise profits. A private establishment may have competition from other entities within the same locality.


A franchisee may benefit from the reputation of their brand by getting funds from lenders with the backing of the franchisor. With a powerful brand behind you, getting credit from suppliers is easy unlike when you are on your own.


Rapid extension and better value


It is easier for a franchisor to identify a gap, develop and innovate a new product in the shortest time possible. An individual enterprise introducing new products requires lots of funds and time which may mean taking up fewer profits.


A franchisee who wants to exit the franchise has a large pool of buyers compared to an individual start-up. This is because investors opt for safer, faster growth and increased profits that come with a known brand.


As the UK franchising industry continues to grow, it is important to do due diligence in the industry you want to venture into. With a high success rate, you can be assured that franchising can fulfil your dreams of self-employment and job creation. Browse our franchise directory today to find your next business venture.


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