A franchise business can be a good choice for someone who wants to be in business for himself, but with more support and less risk than starting something from scratch.
The risk of owning a startup business is much higher because there’s no one guiding you, no proven systems and processes in place, and no brand recognition. However, franchise owners need to be comfortable with following someone else’s rules and systems and not wanting to blaze their own trail. Former military personnel are usually great at starting a franchise because they are used to following a system.
If you are considering buying a franchise, this article presents the reasons you should buy a franchise instead of starting a new business:
1. Brand Recognition
As a franchisee, you benefit from consumer recognition of the brand. You eliminate any questions about whether a consumer will like your product because they have already established their interest in that particular brand’s product.
For example, a fast-food franchise like McDonald’s is well known and its franchisees automatically enjoy brand recognition, marketing, and sales promotion when opening a McDonald’s franchise unit.
The problem with mature brands like McDonald’s is the over-saturation of the market. Hence, brand awareness alone doesn’t guarantee success.
2. Marketing Support
Buying a franchise guarantees support from the franchisor covering advertising and marketing costs. A franchisor typically charges a small percentage, between 2 – 6% of profits, for advertising costs from all franchisees. This finances marketing for the entire franchise brand.
For example, when a store opens in a new location, it’s not uncommon to see franchisor marketing channels, including email, social media, and TV, advertising the new site as their own. This way, the support received reduces the number of personal investments and strategies individual franchisees must develop to attract new customers.
3. Professional Support
Franchisors provide a good amount of professional support, both in a bid to protect their brand identity and to ensure their franchisees succeed. Field support specialists are provided before or after a franchise agreement is signed, depending on the company policies.
Some areas in which every business requires professional support include site selection, market research, and menu development. Licensing, and the necessary regulations are communicated by the representative or franchise business consultant at no cost.
The representative works with you as you prepare, and sometimes after the launch of your franchise location.
4. Financial Support
Most franchises provide financial support to their franchisees. The type of financial support available depends entirely on the infrastructure within the company. Some franchisors offer direct financial support up to a specific limit, while others have third-party partnerships that can directly finance their new franchisees.
Financial support from franchisors helps you focus on getting your franchise unit launched and reduces the hassle of getting financing from a financial services firm. The level of support a franchisee can receive might depend on credit score, veteran status, and net worth.
Support received from your franchisor may also be specific to equipment, real estate, and supply chains. In cases where a franchisor does not provide direct financial support, you can still have an advantage with a third-party lender since you have the brand recognition of your business to use.
5. Achieve Scalability Using the Franchise Model
Franchise business models are built on their ability to replicate and scale their systems across the board at all franchise locations. Franchisors also provide compounded benefits to multi-unit franchisees who own more than one franchise unit, and master franchisees who may purchase the franchise rights to a large territory and then resell them to other sub-franchisees.
The franchise system allows you to expand your business more efficiently. Even if you have the financial capacity to buy multiple franchise units at once, you can simply start a single franchise unit and be deliberate about plowing back your business profits into buying new units and growing your operations.
Rick Fisher, a major Five Guys franchisee, says they bought their first franchise unit in 2008 during a recession. During that time huge discounts were available, which they were able to leverage to grow their operations. Now, they have over 20 open franchise stores with five other units in development.
6. Enjoy High Speed to Market and Faster ROI
New entrepreneurs must do some heavy lifting to run their business, including research, cost estimation, site location, and real estate requirements. Franchise owners receive help with all of these things, reducing mistakes and getting to market quicker.
According to Fransmart prospective franchisees can launch a franchise business in under a year, which they call year zero because you haven’t started operations. When you do start operations, Fransmart projects that by blitzscaling, which is investing back your profits into your operations to grow your franchise empire with house money, you can continue to add stores and increase ROI.
Franchising is better than starting a new startup for many reasons including support, quicker launch to market, faster ROI, and faster product development processes. The multiple responsibilities associated with starting a new business should make you consider a franchise opportunity. If you wish to learn more about franchising, contact Fransmart today.