Starting your own business is exciting, but let’s be real-it can also be scary. The statistics aren’t encouraging, with the majority of new companies shutting their doors in just a few years. But what if there was a way to become a business owner without taking as much risk as starting entirely from scratch? Welcome to franchising.
If you ever dreamed of owning your own business but were afraid to attempt it all on your own from scratch, franchising can be the solution for you. Let’s discuss why everyone is jumping on this bandwagon and whether or not it could be right for you.
What Exactly Is Franchising?
Consider franchising as a business alliance with training wheels. If you buy a franchise, you’re essentially paying for the right to do business under another company’s brand name and business model. The parent company (franchisor) offers you their proven formula for success, and in exchange, you give them ongoing fees or royalties.
It’s a win-win. You get to be your own boss with a security net of assistance and guidance, and the franchisor gets to develop their brand without shouldering all of the expense of opening up additional stores.
The Money Talk: How Franchising Can Save You Cash
Lower Startup Costs
It takes a lot of money to build a business from ground zero-very much so. You must develop products, design advertising materials, figure out operations, hire staff, and so much more. With a franchise, all this sweat has been done for you.
The franchisor provides you not just the store design and equipment requirements but also training guides and promotional material. This alone can save you tens of thousands of dollars in development costs.
Economies of Scale Work in Your Favor
Here’s an easy thing about franchising: you get to take advantage of the whole franchise network’s buying power. McDonald’s isn’t buying a few thousand napkins when they do order napkins; they’re buying millions. That level of bulk purchasing power translates to less money for supplies, equipment, and inventory across all the franchise locations.
Lower Overhead
Most franchisors handle some of the functions of the business centrally for you so that you do not have to. They can perform payroll processing, accounting support, legal compliance, or customer support training. This means you have fewer headaches and less operational cost.
The Power of an Established Brand
Instant Recognition
When you open your own independent coffee shop, you’re establishing brand recognition from the ground up. But open a Starbucks franchise (just pretend.), and the people know what they’re getting. They trust the brand, understand the quality, and have an automatic loyalty.
That instant brand recognition is pure gold. That is, you don’t have to invest decades in creating customer trust-that trust is already established.
Marketing Muscle
Large franchise chains have marketing budgets that you, as an independent business owner, would never be able to finance. They’re executing nationwide advertising campaigns, sponsoring large events, and are active on social media. You’re reaping all this publicity as a franchisee without having to pay the full price.
And you’ll generally have access to professionally created local promotion materials at no additional cost to you, saving you the cost of contracting designers and marketers.
Training and Support: You’re Never Alone
Learning from Experts
One of the best things about franchising is training and support you obtain. You’re provided with comprehensive training programs by most franchisors that range from day-to-day operations to financial issues.
You’re not just buying a business name-you’re buying access to decades of expertise and tested systems. The franchisor has already made the errors and figured out what works, so you don’t have to do it all the difficult way.
Continuing Support
The relationship doesn’t end once your initial training. Quality franchisors provide continuing support through regular check-ins, additional training programs, troubleshooting assistance, and new business method updates as the market changes.
Location, Location, Location
Site Selection Support
One of the most significant factors of a retail business can be made or destroyed by location. A few franchisors have real estate staff that help the franchisees select locations based on demographic data, traffic flow, and market research.
Better Lease Terms
Franchise brands with strong names usually possess more bargaining power in terms of lease deals. Landlords are more likely to provide favorable terms for well-known brands because they’re seen as lower-risk tenants.
Is Franchising Right for You?
Franchising isn’t for everyone. You’ll be playing by the book and rules of the franchisor, so fewer opportunities to be an original than in a complete independent business. You’ll also have ongoing royalty payments that eat into your bottom line.
But if you aspire to be an owner but appreciate having a proven template to build on, franchising could be ideal. It’s particularly appealing when you’re a new business owner, want to minimize risk, or prefer focusing on operations rather than building business systems from scratch.
The Bottom Line
Franchising offers an excellent opportunity to be a business owner with the benefit of an established brand name, proven methods, and ongoing support. While it involves playing by someone else’s script, it can significantly enhance your chances for success compared to going it alone to create a business from the ground up.
The trick is research. Explore different franchise options, find out the entry fee, and find out if the values and business of the franchisor align with your goals.
Remember, franchising is no guarantee, but it does skew the odds in your favor. To many entrepreneurs, that’s all the edge they need to turn their small business ownership dreams into a reality.