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In a
sense, franchising is a business model whose primary purpose is risk
minimization. Starting up a new business is very risky. Studies show
that over 90% fail within three years. The primary reason that the
failure rate is so high is because the owners have to go through the
learning curve of operating that specific type business.
Investing in a
franchise is as close as you are going to come in today’s marketplace
to a guarantee of success. In all human endeavors there is a learning
process. This learning process requires going through a series of
trial and error encounters wherein knowledge is gained by trying and
failing, trying and failing again and again, eventually trying and
succeeding. This process is generally called the learning curve.
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In the context of
franchising, the franchisor has already gone through the learning
curve and has learned the secrets of success for the specific
business. This is fundamentally why franchising is so popular; by
investing in a franchise you minimize risk and give yourself the best
possible chance to succeed.
Some of the most
important advantages of buying a franchise include:
- Training -
Nearly all franchise companies provide you with all the training you
need to become successful. After all, they have a vested interest in
you being able to run the franchise profitably and really want to
see you succeed!
- Brand Name
Recognition - It can take years for a business to successfully
build a well recognized brand that helps drive sales and provides a
competitive advantage over smaller competitors. Brand awareness can
make or break a business. Consumers buy things that they are
familiar with and work with companies they know and trust.
- Purchasing Power
- Most franchise companies have the opportunity to purchase all
their goods, products, and supplies at reduced rates because they
buy in bulk. Right away these savings can be passed onto each
franchise unit and provide a competitive advantage in the
marketplace.
- Proven Business
Plan - Running a successful business is similar to learning a
math formula and following its rules and laws time and time again.
Through years of experience franchise companies know what works and
will teach you their formula for success. Specialized knowledge and
proven systems relating to that business will allow you to expand
your business more easily.
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Advertising/Marketing - In addition to an established brand,
most franchise companies support their franchisees with both local
and national advertising and promotions to help drive sales.
- Support -
Successful franchise companies provide ongoing support for their
franchises and franchisees. This usually includes ongoing training,
system upgrades, product enhancements, as well as question and
answer support systems using dedicated representatives within the
organization.
- Low Start-up
Cost – Even though you are receiving the good will associated
with that franchise, the price of the franchise is not inflated nor
are you paying for past earnings, this concept allows you to pay
less than if you were buying an existing business and also allows
you potential for higher asset appreciation.
- Lower Risks
– Most business experts agree that a franchise operation has a lower
risk of failure than an independent business. The statistics on this
vary depending on the definition of failure. Whatever statistics are
used, they consistently suggest that a franchise is more likely to
succeed that are independent startups.
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