If you’re not quite ready to launch your own startup, why not look into running a franchise first?
By Kate Sergeant (Founder, FranAcademy.com)
Many people dream of running their own business, but are often put off by a whole host of reasons: it’s too risky; I don’t know enough; it will cost too much… The list goes on. For anyone thinking a starting a business, but who is nervous about going it alone, franchising could be a great solution. What’s more, as technology increasing pervades every aspect of our lives, there is also an increasing number of franchised tech opportunities being offered. Everything from IT repair, to website builders to tech supplies are now offered as franchise businesses.
A franchise business is a system where one person (the franchisor) has an established business model and allows someone else (the franchisee) to copy that business. The franchisee will own his own business and can expect access to a tried and tested business model, an established brand and ongoing support and training from the franchisor. In return, the franchisee will usually pay a licence fee up-front, followed by an ongoing management charge, usually based on turnover.
So why might buying a franchise be a good idea?
Increased Chances of Success
For one thing, the chances of a start up being successful and surviving in the long term is far greater for a franchise than for an independent business. It’s a sad fact that the majority of start-up businesses wont survive to celebrate their second birthday, whereas a recent survey in the UK found that 90% of franchises are profitable. Even allowing for some statistical error, those figures are hard to ignore. You can find out how franchise businesses manage to be so much more successful than standalone start-up businesses The Franchise Report.
Lack of Knowledge or Experience Can be an Advantage
When it comes to franchising, having no prior knowledge of the sector you’re in can actually be an advantage. This is because part of what franchisees pay for is a detailed operations manual that sets out every process needed to operate the business on a daily basis. This will include how to promote the business and win new customers, how to deliver products and services to those customers, as well as procedures for dealing with customer complaints, invoicing, book keeping and admin. The franchisor will then train the franchisee on how to implement these systems and processes in the business.
It’s important from the franchisor’s perspective that all franchisees in the network are operating in the same way. This helps to generate brand recognition and ensure consistent quality standards are maintained throughout. Think about it, if you order a hamburger from McDonalds in New York, you’ll get exactly the same hamburger that you would if you ordered in Seattle.
It’s vital to the success of the network that all franchisees follow the system exactly. For this reason, having no prior experience can be an advantage; because the franchisee wont have any pre-conceived ideas about how to run the business and is less likely to want to change the system.
Compare this to going it alone when in most cases, the choice of start-up will be limited to an industry that you’ve already worked in or at least have some experience of.
Last but not least, franchisees have the benefit of a support system in the form of the franchisor and the other franchisees in the network.
Many tech businesses involve lone or remote working. Many of the most successful tech start-ups began in someone’s spare room, working long hours into the night. The risks of loneliness and isolation for start-up businesses are real; and having the support of peers (in the form of fellow franchisees) and an experienced guide (the franchisor) is invaluable.
There are many reasons why operating a franchise business can be a terrific choice; however, you must choose wisely. Not all franchise businesses are created equal. Some are very well run and offer excellent potential for both profit and the chance to realise a lump sum when the business is sold. Others are likely to be costly mistakes. To avoid this, it is vital that any prospective franchisee researches the industry fully. This should include looking in detail at the network you propose to join and never sign up until you thoroughly understanding the commitment that you are taking on.