Stats relating to the five year survival rates for new franchises are said to be around 15% higher than those relating to other start-up businesses based around original ideas. The most common form of franchises are within the fast food takeaway sector, with companies such as McDonald’s, Subway, KFC and Pizza Hut prime examples of companies that grant licences for the franchisee to sell the (often trademarked) services or products.
Benefits of a Franchise
There are numerous benefits to buying into a franchise, the main one being that you can step right in to an already tested and developed idea with ready made products and services to go.
You do not need to go through the painstaking process of choosing a name and coming up with an original business idea.
Alongside this there is of course the brand reputation to think about. You’ll have access to a franchise reputation that has experience and expertise and will be likely to offer continued support to ensure that you are a success under their name. Franchise owners often receive high levels of support, including financial incentives, management development, training and advertising assistance.
Financial assistance is often more forthcoming from banks if you are looking to buy into an already existing and successful franchise as opposed to a start-up business package being built up from scratch.
Are There any Negatives to Buying a Franchise?
The major point to first think about when buying into a franchise is the financial implications. An initial layout is likely to be quite expensive as the franchisor will expect a sizeable sum up front as well as an on-going fee, which could be anything from a regular fixed fee to an annual percentage of turnover.
If you buy into a franchise you will have control over the day to day running of the operation but you may find that you are restricted when it comes to the types and prices of services and products for sale and the way in which they are advertised. You will gain all the financial benefits associated with running an already successful brand with a strong reputation.
This can equally be turned on its head and have a negative connotation, if the brand suffers a hit to its reputation, your individual store will also suffer. If the franchisor decides to change something dramatically then you are bound to follow their instruction and it can also be quite difficult to sell up and leave a franchise once you are in, as the franchisor could be restrictive in whom you sell your company to.
Is a Franchise Right for You?
There are of course advantages and disadvantages to buying into a ready-made franchise. If you are prepared to live with the balance between certain restrictions from the franchisor and having control of the day to day running of the operation you will reap the financial rewards of an established brand and reputation.
If you are prepared to make a larger financial outlay initially, a franchise does provide you with less risk of failure than with a business start-up that is based around your ideas and your expertise alone.
Whichever route you choose to go down, whether it is a franchise or your own start-up business, there is advice and assistance available to you from a few different sources. You must ensure that you have researched a number of opportunities available to you, as well as financing and on-going financial and administrative support available to small businesses and franchises. We have a number of short articles relating to support and the different areas you will have to take into consideration should you be contemplating starting your own business; with assistance regarding business start-up packages, virtual offices and telephone answering services.