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What are the main benefits of becoming a franchisee?

Monday, 13 December 2010 | By Kate Sallai

I want to run my own business and am weighing up whether to buy a small independent business or take on a franchise. What are the main benefits of becoming a franchisee?


In considering whether to buy an independent business over a franchise, consider this: Would you consider climbing Mount Everest on your own without at least enquiring as to the pros and cons of employing the services of a strong, reliable and experienced Sherpa?

 

That Sherpa is someone who has been there, done that, and who knows all of the potential pitfalls and the elation of reaching the summit.

 

While that analogy might seem somewhat extreme, for some people, buying into a business, whether a franchise or independent, will be the most personally challenging and life-changing decision they’ll ever make; a journey of danger, intrigue, exhaustion and, hopefully, elation.

 

In essence, you need to ensure you’ve considered both options thoroughly, prior to making any formal commercial or personal commitment, just so that you have your eyes wide open moving forward.

 

For me, the decision between going the franchise route or the independent route may also be determined by what opportunities are available in both market places at the time, and how those opportunities fit in with your personal interests and budget.

 

In terms of why the franchise route is often considered more secure and/or less risky, the following outlines some of the key benefits of purchasing a franchise business over a traditional independent small business:

  • Established brand;
  • Proven business concept and operating model;
  • Established operating policies, procedures and standards;
  • Lower statistical risk of failure;
  • Immediate momentum on opening through established brand equity of the franchise;
  • Established customer base of the franchise;
  • Training and on-going support from the franchisor;
  • Shared marketing costs with the franchisor and other franchisees;
  • Support in difficult times from the franchisor;
  • On-going product and service innovation;
  • Increased buying power via the franchise group;
  • Easier to obtaining finance from banks and other lenders; and
  • Increased chance of a successful sale of the franchise upon exit.

It should be noted however that the benefits outlined above are based on the assumption that the franchise business being considered is being operated with world-best practices, and by a franchisor that genuinely has the interests and success of their franchisees at heart.

 

Sadly, this is not always the case. It is therefore crucial that if you do choose the franchise route, that you still undertake all of the necessary detailed due diligence on your preferred franchise[s], particularly across the topics listed above, prior to making any formal commitment.

 

It should be also noted that there are many examples of highly successful independent businesses, which have been launched, operated and managed diligently, professionally and with the necessary attention to excellence, which has seen them prosper year-on-year in their own right. This option should also not be discounted out-of-hand.