We have all heard the dreadful statistics about how many new businesses fail within the first year and first few years of business. Franchise owners tout these statistics because the rate of survival for a franchise is much higher. Why? You might ask, we’ll it’s mainly about the systems.
If you are contemplating a new business you should at least consider purchasing a franchise. It may not be a good fit for you after you check out the options but it’s at least worth a look as the advantages and disadvantages are many. Franchise ownership is wonderful for a great many people, but owning a franchise is not for everyone.
Before making the investment and commitment to purchase a franchise, you should consider:
Exactly What Is A Franchise?
A franchise is simply a method of distributing goods or services and has two levels of people involved – the franchisor and the franchisee.
The franchisor provides the trademark or trade name and its established business systems.
The franchisee pays a fee, or sometime multiple fees, to do business under the franchisor’s name and system.
The “franchise” represents the contract between the franchisor and the franchisee.
Are You Cut Out To Own A Business?
You should ask yourself some serious questions before you tackle a new business ownership, regardless of whether or not it’s a franchise:
- Do you have the motivation and drive to succeed?
- Are you confident about the product or service you will provide?
- Will you able to motivate and train your employees, if you will have any?
- How well do you know the industry you are venturing into? What level of experience do you have in this area?
- Will you be able to promote and sell your product or service and the brand you’re buying?
It is important that your family support system is aligned with your business plans. And you should make sure that you have an accountant, a banker, and an attorney on hand to help you with the necessary start up paperwork and processes. Getting started the right way can mean the difference between a huge success and a devastating failure.
So What’s In A Name?
Purchasing a a franchise can give you a competitive edge because you buy into to a system or series of systems. Since systems can be quite expensive to create with all the trial and error that goes along with creating them, it may make more sense to purchase a franchise that has already done the expensive part. The main value of franchising, however, is the identity of a brand and recognition of a name that you don’t have to work to build from scratch.
In a franchise, the brand’s value is the most important thing, your customer is loyal to the brand, not to you as the franchisee. Nobody goes to McDonald’s because they know the franchise owner. They go because they know the brand and they know what to expect every single time they go there.
Becoming a franchise owner may take some practice because you must be able to work within an established system to be successful. Further, you need to recognize that you’re promoting someone else’s brand and not your own. If both of these things sit well with you, then you’ve got a good shot at being a successful franchise owner.
And Which Franchise Do You Choose?
There are so many franchise opportunities available, I am always surprised to learn the businesses that have been franchised. Because the choices are seemingly endless, picking the best one can seem almost impossible. Did you know that around 45% of all retail sales are made by franchises? Further, there are more than 75 industries to choose from and within those industries there are seemingly endless opportunities.
The best way to make the decision is to think about your own likes and dislikes and what interests you. Make sure you look into any industry that you know something about and be sure you would be comfortable sleeping, living and breathing 24 hours a day, seven days a week, in the chosen industry because that’s what it will require. After you decide on an industry that appeals to you personally and then start your research on the opportunities available within that industry.
Good sources for your franchise search are Entrepreneur Magazine’s annual top 500 list, the International Franchise Association, or just Google industries that appeal to you.
Once you find the ideal franchise for you and you’ve decided that a franchise is your next career move, make contact with the franchisor and start working your way through their process. Once you and the franchisor decide you are a good fit with each other make sure you understand everything that is required of you and the franchisor before you sign on the dotted line or pay any fees.
Do you think a franchise would be a good investment for you?
And just as with any other business decision that may end up with potential legal issues in the future, you may want to consult an attorney to determine what’s best for you. Contact Integrated General Counsel to schedule your comprehensive Business Building Benchmark today so we can help identify the best course of action for you. Normally, this session is $1250, but if you mention this log post and we still have room on our calendar this month, we will waive that fee.
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