How Secure is Franchising?

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People are attracted to franchising for many different reasons; it could be the choice of a more entrepreneurial lifestyle, the ability to be your own boss, or just because they have great business intelligence and they have spotted a great opportunity in the market. Whatever reason they started looking into franchising, they all have similar hesitations before they commit - the most common apprehension being how secure franchising is and how secure their chosen franchise is. When understanding how secure your chosen franchise is you need to ask the relevant questions, most of which are the topics in this blog. Franchising as a whole could be seen as more secure than starting your own business because of the following points:

Established Franchise Business

Franchises are business models that have operated and succeeded elsewhere in the UK and that’s why they have gone down the franchising route. They have proven track records of operational performance and, for some franchises, this can span 30+ years. When you start your own business, you can have great ideas as to what will work and what wont, however, you have no evidence that this will work in practice. Franchises do -  they will have ironed out the creases in their business model and overcome most challenges that you are likely to face when starting a new business.

Established Franchise Brand

When starting a new business, you need to generate hype or awareness of your new business as nobody would’ve heard of you; not only does this take up your time but often involves a considerable marketing budget to do effectively. A franchise will already have the brand awareness and the customer base that will want to buy from you; for example, if you wanted a McDonald’s would you go to the one you’re used to or would you choose the new one that opened down the road? Most will choose the closest one, as they trust the franchise brand, not the individual stores and this is what you are paying for.

Buying Power & Buying Requirements

As you will be approaching a supplier or vendors as a franchise, and not an individual business, you will have the entire franchisee base as a buying power. This allows you to negotiate a discounted price for products/services which will ultimately increase your profit margins. As the franchise will have already built the business they know what you will be needing for your business to become operational, this can be your supply chain, the builders of your site or even the staff that are employed by you. This means the franchisor will be able to aid you in what requirements you should be looking for when buying for the business, they can also give you what costs you should expect for such items, to ensure you are getting the best price.

Business Support & Training

Franchises will often require very specific training for its staff to use the machinery or operational processes required in an average working day and this is something that the franchise model helps out new business owners greatly. Franchisors have undertaken and tested several training programmes and identified the best working model and this can be utilised by all new franchisees. Most franchises also have a dedicated support team to aid you with day to day business, with the answers to most questions the franchisees will have, because they have most likely been asked the questions before. One of major function of support you receive is how you are going to market your business. As the franchise brand is already established its more about just your business and not the franchise as a whole, which makes it easier to begin with. This depends on the franchise but some will complete the marketing themselves so you don’t have to whilst others can give you advice on the most previously effective marketing campaigns for their industry. The training and support offered by franchisors is one of the biggest contributors to making franchising more secure than opening a new business, as you have a larger business that is genuinely trying to help you out and they have overcome most of the hurdles you are likely to face, so they have the knowledge to help.

The Franchise Collective Brain

As mentioned above, the support you receive from the franchisor is a serious contributor when starting a new business but you don’t just have the franchise owner, you also have the collective brains of all franchisees of that chosen franchise. You have the unique opportunity to understand why certain franchisees are performing better than others by networking to understand what they are doing differently. This can be done in person or the franchise might set up private message boards to collaborate ideas, something that you can always have at your fingertips. This also works for staying on top of products and services, each franchisee will likely update their product range at the same time and this will be dictated by the franchisor but each franchisee will have to implement the change and therefor collaboration can be used again.

How Secure is Franchising?

Well, franchising will most likely require more finance than setting up a new business at the offset but this investment is much more secure. completed a study which showed the success rate of new business as 15% compared to a 90% success rate from franchises. This, as you can see, is a substantial difference and this is why it costs more at the offset; you are not only getting a business model with proven results but you are also getting the collective brain and support from the franchisor and other franchisees.

To sum up, I think it’s good to understand a critical point of franchising, an entrepreneur only tends to look to expand his business when the original unit is performing well, otherwise he would be focusing on making his original unit survive or flourish. It is hard to suggest that franchising isn’t secure when comparing to other options of opening a business, this however needs to be understood that they’re still risks associated, it’s just less risky and more secure than other options. You will still need to have the passion to make it a success but you don’t need to worry about as many areas as you have the support/answers to solve any issues there are before they arise.