Franchises have a good success rate
Statistics show that franchises have a much lower failure rate than new business start-ups. This helps explain why franchising is becoming an increasingly popular option for people wanting or needing to go into business for themselves. However, it’s a mistake to think that all franchises are a good bet. Like all businesses, there are no guarantees of success and some franchises have not delivered what they promised or the financial returns. As with any other kind of business opportunity, you should do your homework thoroughly before you buy a franchise.
Are you right for franchise ownership?
Clarify this basic question before you consider franchise opportunities. Good franchises work well because they are developed business models. This means that the whole business has been thought out and systematized. When you buy the franchise you will be trained to implement a proven system. This will suit some, but not all.
Unsuitable business types
Some franchises are not suitable for strongly entrepreneurial business types who enjoy the act of creating a business from scratch. If you have lots of initiative and ideas and enjoy ‘doing your own thing’ rather than being told what to do, then you will likely chafe under the typical restrictions of a franchise agreement. Franchisors (the person or company selling the franchise) have developed a system that works and they will want franchisees (the people buying a franchise) to work within the system. They have developed a plan that works and they want you to work that plan. “Don’t fiddle with the knobs” and “Follow our guidelines because we know what works” are the underlying instructions. The whole aim of franchising is to duplicate the original so that customers get the same standard and quality of product or service from any outlet. There are therefore fewer opportunities for initiatives, or for departing from the established model. For instance, areas such as marketing and promotion might be handled by the franchisor on behalf of the whole franchise group.
Suitable business personalities
Franchise businesses are very suitable for people who have some business experience but have never owned their own business. For example, people who have been employed in other businesses and have gained some business and administrative skills over the years often do well in franchises. Franchise opportunities can be split into ‘buying a job’ and ‘buying a business’. The first option provides you an income, generally has a lower entry cost, and opportunity to grow the business is limited. The second option usually costs more but you have greater flexibility and capacity to grow the business.
In both cases a good franchise will provide considerable guidance and support for the franchisee. One advantage of buying a franchise is that you don’t necessarily need experience in that particular industry, as a good franchise system will provide you with the necessary training and support.
Compare this to starting a business, where lack of specific experience in an industry often proves a severe handicap.
Qualities you must have
It’s a mistake to think that owning a franchise is a soft option. It’s not, nor is it quite like working for a business or in a corporate office. You may start with the advantage of knowing that your franchise is based on a proven business idea, but you still have to make your particular franchise work in your area. You should receive some training, but not all your problems will be solved for you. If you’re not prepared to put in the hard yards, particularly in the first years, your business could fail or the franchise could be taken away from you by the franchisor. You, therefore, need the same drive and persistence and a willingness to overcome challenges that anyone starting a small business requires. In addition, some basic business skills will greatly increase your chances of success. If you don’t have such skills, think seriously about acquiring them before you purchase a franchise.
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