Why Buying a Franchise Is the Recipe for a Successful Business Start Up


by Sil Pancho



So you want to own your own business. Good for you. The World needs entrepreneurs willing to risk their time and money on new ideas. However, the sad truth is that even with brilliant ideas and enthusiastic entrepreneurs, most start up businesses fail within the first two years. Yet take heart, all is not lost. It is possible to own your own business and dramatically increase your chances of success.

What is this miracle of modern business? The answer is franchising.

What is a franchise?

Now before we continue, let us be clear about what franchising is (and isn’t). A franchise is not just the right to use a brand, although the brand will be a crucial part of the deal. No, a franchise is much more than that. A true franchise is a complete business system, comprising every aspect of how to operate the business. This will include:

• the products or services offered for sale,

• the methods for delivering those products and services to customers,

• marketing and promotion,

• dealing with customer complaints,

• invoicing and credit control

and every other operation and process needed to run the business.

The business system will be combined with training and support provided by the franchisor to the franchisee and his employees. It is this trinity of recognised brand together with business systems and training and support that together characterise a true franchise.

In this way, a franchise is like following a recipe. The franchisor will already have the recipe for creating and running a successful business. If the franchisee follows the same recipe, the franchisee should also end up with his own, successful business. By replicating the franchisor’s tried and tested business model, the franchisee dramatically increases his chances of success when compared to operating as an independent business.

A tried and tested model

In an established franchise network, the business model will have been tested many times, not just by the franchisor, but by dozens of other franchisees. This means that the franchisor will also have the opportunity to collect key performance data from his franchisees. In turn, this allows the franchisor to set bench marks which will serve as early warning systems, identifying potential issues in a franchisee’s business before they become significant problems.

Of course, the franchisor is not going to share his secret recipe for free. The trinity of brand, business systems and training and support comes at a price. Typically, this will include both an initial licence fee and on going management charges calculated as a percentage of turnover. These fees mean that buying and running a franchise business is more expensive than setting up an independent business. However, the increased initial costs may prove to be money well spent in the long run, particularly if the alternative is a significantly higher risk of business failure.

Let us conclude with a note of caution. As with all recipes, some are tastier than others. It is vital that before investing in any franchise, the franchisee thoroughly researches the industry as well as the specific franchise network that he is considering joining. Buying a franchise can be a fantastic business opportunity, provided the franchisee goes into it with his eyes wide open and wholly understands what he is taking on.

Source by Kate Sargeant

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