Ever wonder how you can start your own business with low risk? Well, if that is you, franchising might just be the right option for you.
The concept behind franchising is simple. It’s a halfway between starting a business from scratch and buying one. You just open up a branch of an existing business. This business will help you with setting up and running it and you pay them an initial fee plus a small percentage of the turnover of the business in return.
The franchisor which is usually an establish company creates a business package, which it sells as a franchise to a ‘franchisee’, someone like you.
The franchisee has the right to operate a business under the company’s name, in return for a one-off initial fee, and then an ongoing fee which is a percentage of turnovers.
The concept is now very popular worldwide and its growing fast in Nigeria and other African countries.
There are lots of franchises, from sport betting and cleaning business, to publishing agencies to fast food outlets.
The Pros of franchising.
1. Proven Business Concept
A know brand, good business concept, good training and support are some of the advantages of someone looking to start a franchise.
Think about it, how much will it cost you in advertisement to beat McDonald in America or Shoprite or Bet9ja in Nigeria?
But, through franchising you are taking advantage of the existing business success, their marketing and as well as customers loyalty to the brand.
2. Less Risky
It is far easier to start your own business and fail than it is when opening a franchise outlet. I once lost all my invested capital in a business and there are times I couldn’t make any money for almost two years from another business I started.
In franchising, such things are less likely to happen. You get all the benefits of the franchisors knowledge which has been learnt overtime. The franchisor should train you and provide you with an effective operating manual which will help you learn to run the business well.
3. Cheaper Supplies
As a franchisee, you have the advantage of being able to buy in Supplies from quality, tested suppliers at reasonably low prices. This helps give you a higher profit margin as compared to someone starting from scratch.
4. Easier to Get Fund
You know that business will always need money to run smoothly. It might be for starting or scaling up. Whatever the need maybe; getting fond on a timely manner when needed is very important.
So, here comes another advantage of franchising is that banks are more inclined to lend money to someone who wants to buy a franchise than to a person who wants to start a business from scratch. The banks are more comfortable with the successful track record of other similar franchises and the banks value the mentoring programs that most franchises have to assist the new entrepreneur.
Another huge advantage here is that some franchisors have agreements with some banks to lend franchisees a set percentage of the money they will need; this makes it considerably easier for you to get the necessary funding.
5. Blueprint To Success.
Even without any experience or knowledge of the business, you will have a lot of chance to become successful. The franchisor should train and provide you with an operating manual which will help you learn how to run the business well. They can also give you financial projections; such as the sort of revenue to expect and when to expect them, based on their past experiences.
Franchisors will most likely give you good advice on what sort of premises to find. And also franchisors will give you marketing tips.
All this laid down success blueprints give you a winning edge if use properly.
As you might have known by now. Every decision will ultimately have it merit and demerits, advantages and disadvantages. It is very crucial to weight your option so that you will be able to make the right choice.
1. Limited Earning.
If you are very hardworking, franchising might not be the best idea for you because the franchisor takes percentage of the turnover as a fee. This can significantly limit the amount of income you can earn.
2. Limited innovation.
In franchising, the franchisor is mostly in control. You will have to abide with the rules and mode of operation of the franchisor. If you are into food business for instance; it won’t be easy for you to introduce a new type of pizza or burger that the franchisor does not produce. Even if you perceive it to be a great idea.
In a nutshell, while you are running your own business, you would not be fully in control.
3. Limited Freedom
Most franchisors check up on their franchisees, to ensure that their quality standards are maintained. This is perfectly reasonable, but does mean that if you let standards fall when you’re going through a rough bit at some stage, your franchisor could get tough with you – and eventually, might be able to chuck you out of the franchise all in all.
4. You Follow Directions
Allegedly one of the main rationales for fighting is that people who buy a franchise business do not want to run it the way the franchisor, the person who created the business, wants them to run it.
If you are some sort of a rebel who do not want to follow the directions of the franchisor to a tee, it is best you design, create, and start your own business.
5. Unexpected Changes
Years ago PizzaExpress bought their franchises back years ago. While they pay for the privilege, most of their franchisees are not well suit to sell when than what them to. And while the case of PizzaExpress is still unusual, it does happen from time to time.
It is of importance to note that franchisors can change their strategy and you as a franchisee has no control over it.
Check every details of your contract to see what rights you have if the franchisor does want to do this in future.
Quick Tips to find a franchise For You
- Use a lawyer who is familiar with franchise agreement. Such lawyers will help you to know what is reasonable and normal and what is not.
- Talk to few current franchisees first before you sign up. Try to know if they are happy or not and what the cause might be. Just know how they feel.
I would recommend that you go into some franchised outlets, and try to chat to the boss – just try to find a time when they aren’t really busy! See if you can buy them a coffee, and pick their brains. Most will really be flattered you’ve asked for their opinion, and be willing to help.
- Avoid promises that are too good to be true from franchisors. There are many unscrupulous franchisors out to make a quick buck; the danger is that they may take your money and deliver very little back.
- Use franchising magazines that you might find to search for franchisors. But, a word of caution here; be very wary of the franchisors: most of the profiles you will see there are written by franchisor, or at least paid for by them.
- Attend franchising exhibitions around your area. At each of these you have the opportunity to speak to lots of different franchisors about their offers, and very quickly get a sense of what it is all about. If such event is holding in your area, I strongly recommend that you attend one.
Wrap It Up!
Still wondering if franchising will work for you? Well, if you’d like to run your own business but doesn’t have a killer idea, are reasonably risk-averse and have good management skills, franchising can make a lot of sense and earn you a very comfortable living.
Above all, try to talk to as many franchisees as you can before you commit to one yourself.
Over To You
So, what is your experience of franchising, which franchisor have you work with, or is there and franchise that you will love to recommend? Please share with us in the comment below. Believe me; I sincerely value your opinion more than mine.
And don’t forget there is love in sharing!
See You At The Top!!!