Advantages and disadvantages of franchising
The challenges of starting a small business and keeping it going cannot be underestimated and many do fail, even in the very good times. The hurdles can be substantial and the ability to get a business up to speed, making profit and supporting you is not achieved by many.
Franchising has attracted the attention of many over past years and the tough economic climate has highlighted its strengths and shown that there is a more secure way to start your own business. Its formula of a locally owned and run enterprise, driven by a small business owner, with branding, economies of scale and support from the wider network, gives the business a far better chance of success. However, this is only the case if it is done well.
Good franchise opportunities will offer you a proven business format with the initial and continuing support that you will need. Your business will work under the brand established by your franchisor using the business system they have developed and proven in the marketplace. You will pay an initial fee to set up using the brand and the proven business format. You will then pay continuing fees for ongoing support that will help you to operate and allow you to build the business and, eventually, a capital asset that you can sell.
The ongoing support is one of the key reasons for the success of franchising. The franchisor has already gone through the pain of finding out what works and what doesn’t – they have invested in the systems and are now willing to teach you how to replicate it. However, don’t think you can pick and choose which parts of the systems you want to use: it is very much all or nothing. But if you are paying for a proven system, why wouldn’t you follow it?!
What are the advantages of franchising?
- For over 20 years consecutively, around 90% of all UK franchisees reported profitability over the previous 12 months. Failure rates are correspondingly low over the same period.
- The business format is proven.
- You have the opportunity to build your capital as well as your earnings.
- It is your business and you are the owner, providing you follow the system, you decide what goes.
- The major banks are very supportive of good franchising.
What are the disadvantages of franchising?
- Running any business is hard work, demanding the highest level of personal and family commitment.
- You make a financial investment, however, no investment is guaranteed, especially when it depends on the efforts of both you and your franchisor as well as the vagaries of the market place.
- You buy into a proven business system for its benefits but you also take on the responsibility for following it – if you want complete freedom to run the business solely as you see fit, franchising isn't the right vehicle.