Beginning your very own business can be a difficult and long drawn out procedure, full of pitfalls and traps for the novice entrepreneur and regrettably a substantial amount of enterprises never reach the break-even stage.
If you invest in a franchise business it allows you to reduce the learning curve considerably. Not only will you immediately be trading under an established name – which has most likely taken many years, of fine-tuning and promoting to establish – but you will benefit from the business know-how and experience which has made the franchise a success. The person who launched the business into which you are considering buying a franchise would have possessed a whole lot of determination and an unusual amount of drive to not only have created the business concept in the first place, but to guide it to where is now – a (hopefully) successful franchise. If you do decide buy a franchise opportunity, you will be joining, and be able to benefit from, the same culture of success.
So what are the reasons to NOT buy a franchise? The two main reasons are cost and restrictions.
Starting a franchise will often cost more upfront than starting your own business idea. This is because you need to pay a franchise fee which which helps defray the franchise development costs, franchise marketing expenses and the franchise training program. There will the be additional fees of franchise royalty payments and normally you will need to contribute to the franchise advertising fund. Additionally the franchisor may insist on the purchaser having minimum amount of money to be available.
Whilst these expenses may seem high, they will normally be be realistic and help ensure that your new business is a success. Conversely opening your own business may be possible on a shoe-string budget, but it will be a lot tougher to get to profitablity.
Some of the limitations that the franchise contract enforces on their franchisees are there for a good reason: The particular franchise has been perfected for years, possibly over decades, and one of the constant battles a franchisor has is resisting the implementation of every new brain wave that a franchisor may want to try. Uniformity and predictability is of major importance in the franchise universe. Every customer or client who knows the franchise chain expects to see the same products, the same branding and the same “look and feel”. It is one of the aspects of franchising that appeals to customers.
Another limitation that may apply is one of territory. Although this is becoming less frequent these days, some franchises still make it a requirement to define a territory in which the franchise may operate. This may have the effect of minimizing competition in a geographical area in order to give a new franchise the best chance of succeeding. On the other hand, owning a franchise territory may place heavy burdens on the franchisee who may be required to develop the territory and reach certain milestones within a given period.
As you can see, there are many factors to study when deciding whether to buy a franchise or start a brand new business idea, but for many, the discipline and direction available from the franchisor will make buying a franchise the wisest choice.
Tags: buying a franchise, franchise contract, franchise development, franchise fee, franchise marketing, novice entrepreneur, opening your own business, royalty payments, shoe string budget, starting your own business