Franchising is a growing industry that lends itself to first-time business owners, as well as individuals who have owned businesses before. The question you must ask yourself is, “Why Should I Franchise?”
Franchising, for the unfamiliar, operates on the basis that a business can be replicated and run by someone other than the originator. Franchisees buy a business opportunity that has been proven to be profitable, and receive the benefit of the lessons learned by the originators of the business (as well as access to proprietary software, techniques, client lists, etc.). In return for access to the system developed, the franchisee generally pays a royalty back to the franchisor (originator of the business).
They key advantage to operating a franchise over an original idea is that the business is already proven to work, and you get the opportunity to share in the expertise of all other franchisees. With a strong network of franchisees to rely on, as well as the resources of the franchisor, a franchisee is on their own, but not alone. For many new business owners, this provides the perfect mix of being a business owner, but sharing in the vast knowledge of other business owners in their same field.
When operating a business, there are considerable costs to consider that are crucial to the success of your business. Who will produce marketing materials? Who will take care of accounting and payroll? Who will provide technical support? Who will create and manage human resources materials? Will you be able to pay someone to do those jobs full time? Franchising often allows you to address those needs through the franchisor organization. Many franchisors will offer design and marketing services as part of the franchise agreement, and others will select locations on your behalf and negotiate lease agreements. These services will be outlines in the documentation given to you by a franchisor, and it is up to you to consider the needs your business will have.
How do you know if franchising is right for you? To help you decide, consider asking yourself these four questions:
1. How quickly would I like to see a profit from my business? Many (if not most) start-up businesses have difficulty turning a profit in their first years. Franchising generally accelerates the rate that you can expect to make money, although you will never find a guarantee of profitability. By replicating a system that is already proven to make money, much of the groundwork is done before you ever own the business.
2. How well can I stick to a system? Franchising is dependent on sticking to the franchise system to achieve results.
3. Am I comfortable being a business owner, but paying royalties for the opportunity to run my business?When operating a franchise, you will almost certainly be paying regular royalties for the opportunity to run your business. Along with those royalties come agreements to conduct a business in a certain way, and follow the guidelines set by the franchisor. If you want to run a business with no oversight by any other living person, franchising may not be for you.
4. Is the concept interesting to me? Deciding between a franchise of falafels or fashion depends on what you want to put your efforts into. Likely you want to do something you care about, which is why you struck out on your own.
If you decide franchising is the right path for you, find a concept that capitalizes on your strengths and provides support where you have weaknesses. Starting a business with the right franchisor is the easiest way to own your own business.