Business Advice for Franchising
Read More: Franchising was an opportunity for us to own a business in an industry that we did not have a lot of experience in, but had a lot of interest in. In addition to our other businesses, we own two franchises. The journey has been good, bad and indifferent. I would highly recommend and highly not recommend franchising to clients, depending on their current situation. Franchising is not for everyone. But it is a great additional stream of income and the pay out is generally great.
These are just some of the pros and cons in franchising that I have experienced. If you work well following proven systems and you have a high interest in that particular industry then a franchise would be a good option to look into. Franchising is a smart business move for the following reasons:
1. A franchise is a business that has a successful system in place. The system has been proven to work in the particular target market and you can see its success. The system has been researched and all of the legalities have been taken care of by the franchise.
2. A franchise is a business that has a complete business plan and outline. It gives you all the recommended tools to set-up the business. You do not have to reinvent the wheel; you just have to customize it to your specific location.
3. A franchise has a marketing system that has been tested. It has samples of printed materials such as brochures, business up fit designs and strategies to support the business. They typically have a relationship with companies that can reproduce the printed materials for you at a lower fee and these materials are branded and easily recognized by your customer base.
4. A franchise gives the franchisee leverage when purchasing necessary tools, equipment and inventory from vendors due to the quantity and vendor relationship that the franchise holds with the vendors. Being a part of a franchise network you are able to buy in bulk with other franchisees to minimize your cost on necessary materials.
5. A franchise gives name recognition and a customer base. For example, McDonald’s are owned by different franchisees, but no matter where in the world a McDonald’s may be, a customer knows what type of meal to expect because of the McDonalds brand.
Even though franchising can prove to be a very lucrative way to have your own business, there are pitfalls that you have to prepare and protect yourself for. If you need flexibility with your creativity and don’t have a lot of operational money then a franchise would not be a good option. Here are some reasons why a franchise may not be a smart business move:
1. The franchise typically will give you the contact information for people that are having success which can give you a false sense of ease because you will hear how simple it is and how anyone can do it. But it is up to you to research and find franchisees that are not having success and or who may not be a franchisee any longer to get their “why”.
2. A franchise can be very expensive upfront. You have to be a quick learn to get up and started so that you can earn income enough to pay your monthly, quarterly or yearly franchise fees. Those fees will typically be due whether you are open for business and earning income or not.
3. There is very little room for originality. Many people go into franchising for the experience. As you go you may notice things that you would do differently, but you can not make those changes without approval first. It could be as simple as a color change.
4. Just because a franchise has the ease of conducting business does not mean it will be that simple for you. A) You can find a location but have problems with zoning. A franchise has no power in different countries/cities/states. B) Hiring the right personnel. A franchise will give you the criteria to look for in an employee, they may even come and help you with the interview process, but even with their support there is no guarantee that you will find quality employees. C) Getting your designs approved can be another road block. I know with developing, even though we had the floor plans from the franchise, the designs had to be drawn up by a local architect and had to be approved locally without the help of the franchise. D) Even though you may pay a large amount for the franchise, it typically does not include your marketing expenses, office tools such as computers, printers etc. or basic monthly operating expenses that occur before you are up and running.
5. Your franchise agreement usually binds you to one territory. If you realize that your area is not working for you, it may be difficult to change or you may have to pay more for two territories. It limits your business range.
There are many ways to be an entrepreneur, franchising is just one. Remember no matter what type of business you venture into, do your due diligence and make sure it is a good fit for you professionally, personally and economically.
Sherri Jones, Marketing Coach
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