Writer : Fatima
Did you know franchises are one of the best business models with the minimum available risk of failure? A franchise opportunity is when you buy an already successful business model, to be replicated in another location. With a franchise, you enjoy the company’s proven track record, professional training programs, a solid supply chain, and expert technical knowledge honed after years of trial and error.
If you are considering buying a franchise business then read on for absolute truths about this business model.
Low Failure Rate
Investing in a franchised business means that the chances of success are pretty high, namely because it is a running business with a new location. Statistics and various case studies show a pretty low failure rate for franchised businesses in general. Thus the franchiser enjoys all the benefits of an established business with turnkey operations, ensuring a seamless trajectory towards high growth.
Business Training Assistance
A franchise owner has the unique benefit of having a turn-key business to run when they embark on a franchiser journey. With a franchise, you receive not just all the equipment and training but also hiring practices and training manuals for staff, supplies, and equipment. Product marketing and training are usually the parent corporation’s responsibility, and the franchiser benefits from the national level marketing campaigns, supply chains, and training.
Collective buying power
Another important benefit of franchising a business is the power of a strong collective supply chain. You will benefit from the parent company’s collective buying of equipment, supplies, uniforms, etc which will translate directly into massive savings for you as the franchiser.
Many well-known franchises have globally and nationally recognized products and services. This means that along with the franchise, the business owner also gets access to a loyal customer base. These customers will not differentiate between a new location and an old one since the product quality and items are maintained in all franchises. Thus franchisees get the unique benefit of in-built customer loyalty and a steady supply of return customers.
Investing in a well-known brand’s franchise may seem extremely expensive at first, but the benefits far outweigh the business costs of starting on your brand. Popular brand franchises like McDonald’s and Tim Horton’s tend to have a high franchise cost but this brings with it a global appeal, brand awareness, global supply chain benefits
Rules and guidelines
Franchises come with the adhering to rules and regulations that have to be followed in every location. These guidelines are often very stringent, but the main aim is to maintain the same standard of product knowledge, service, and uniformity of products or services.
These rules and guidelines that franchisors exert may seem excruciating for an independent business owner but they are part and parcel of the business model. After all, the whole point of a franchise is to replicate the successful business in multiple locations by offering the same standards. Certain things like hours of operations, signage, layout, uniforms, furniture, use of franchisor-supplied products, and raw material will remain the same to maintain the uniformity of the franchised brand.
Another thing to note is that operating a franchise is not a one-time cost. The franchisees have to pay the yearly cost of running the franchise to the parent company. You will have to provide a large amount of money upfront, as well as annual franchise fees which can be anywhere between a few thousand dollars to upwards of $40,000 for bigger brands.
A helpful with recent costs and fees for several large franchises will give you a better idea of the market situation in 2020.
Once you have identified that you will proceed with a franchise business, the next items on your to-do list should be to identify the individual brand’s requirements, their starting capital that is required, the conditions under which they tender franchises, and only after undertaking your due diligence, should you proceed to the franchise application.
The listed items above in no way comprise o comprehensive list, however, these provide a convenient checklist of the pros and cons of investing in a franchise business model. Buying a franchise is just like starting any business; you will have to undertake a market study, due diligence, business plan, and financial situation. Once you have identified all the factors, owning and operating a franchise model will provide you with a greater chance of business success.