Is a franchise the easy way to start a business?
Starting your own business is daunting. One way of getting started is to buy into an existing franchise. But what does being a franchise owner entail and is it right for you
What is a franchise?
A franchise offers you the opportunity to buy the license to a company’s trademark, business methods and products for a set period of time. Many of the chain stores you see on the high street today are franchises including some petrol stations, some fast food retailers and even some gyms.
Buying a franchise allows you to set up your own branch of a business under the umbrella of the larger organisation. You will own and be financially responsible for the business, but you will be using the products, marketing materials and business practices of the established company.
For some entrepreneurs a franchise can seem like an easy option. You’re given help to get started, there is often an established customer base for your business and you can get help and advice on things like marketing and promotion when you need it.
However, it’s a good idea to be cautious before opting for a franchise. As with everything, there are positives and negatives to this way of doing business.
What are the benefits?
- You get to be your own boss (most of the time)
- Your product will have some brand recognition and potentially an established customer base before you set up your business
- You are part of a larger network, so help and support are available for many areas of your business such as marketing and branding
- The product or service has usually been tried and tested before you set up your business so you know some of the pitfalls and can guard against them
- Franchises often offer training opportunities as well as supervision and management
- Franchises often invest in national and regional advertising that would usually be far too expensive for young businesses
What are the risks?
- You are still running a business and you are still subject to all of the risks that entails - it is still possible to fail as a business
- There is a cost involved in purchasing the franchise
- You may be required to purchase certain products from the head office or to give them a percentage of your profits
- You will not have full control over your business and will have to follow the guidelines of the head office
- There may be restrictions on the areas where you can sell or set up your services. You may be restricted to a certain geographical area so that you do not overlap with other franchisees
- Your franchise can be terminated by the head office
Is it right for you?
Owning a franchise can be rewarding and financially beneficial, but there are risks involved. If you’ve found a franchise you are interested in:
- Make sure you’ve read and understood all of the conditions of your contract
- Understand what costs you will incur
- Understand when and where you are allowed to offer your goods or services
- Know how much income you can expect to make.
Finally, ask yourself if you will be happy being controlled by a larger company, or if you would be happier being independent and setting out on your own.