Franchises seem to be a one of the quickest ways to set up your own business without having to form your own business plan and start from scratch. As a matter of fact when I hear folks complain about franchising fees that they have to pay to maintain their position in a franchise organization, I often think to myself of how ignorant they must be about the costs of starting their own business and the risks associated with self-employment. Here they have an opportunity to step into a business that is already functioning and probably successful; they will not have to deal with every day struggles of the small new business. I have never opened a franchise; I doubt that I will as I do not think that I would fit well inside the framework of a franchise. Here is what I see as some of the advantages of owning a franchise from a non-franchisor mindset:
Advantages to Franchise Businesses:
1. As I said above, the business is based on an already successful business idea that has been through the ups and downs of a new business concept. You can decide whether or not you want to purchase the franchise based on past performance before ever committing yourself to the business.
2. Support: The franchise will give you support in your new business venture which would include training, help in setting up your business and probably a manual for employees and running your business.
3. Recognition is probably one of the biggest advantages that I could think of. If you are purchasing a brand new company franchise (i.e. Cold Stone Creamery, etc) then you may not get immediate brand recognition. In most cases when purchasing a well known franchise there is immediate recognition. Also, you the franchisor benefit from the franchise company’s advertising and marketing. So I would think that completing your research on the company’s marketing plan would be a must.
4. As a franchisor you also benefit from the communication with other franchisees and the franchise itself. Being that I have always been self-employed we accomplish the same thing by forming peer groups; however, we always have obstacles in sharing information because how much is too much. These peers are usually my competition. In a franchise you will be able to share information and communicate what is working and is not and be on the same playing field.
5. Exclusive rights: As a small business owner, I wished that I had exclusive rights to my business in my territory. As a franchisor, the franchise corporation will usually give you exclusive rights to a territory which would disallow any other competing franchises to enter your area.
6. Vendor relationships have already been established for you. This is huge because you do not have to go out and share the same risk as a small business would in developing solid vendor relationships. This has all been done for you already. A small business must go out in the business world and develop their own relationships; often times the wrong vendor relationship can cost a lot of time and money.
7. Here is probably the biggest advantage. Financing. Several franchise corporations offer financing and if they don’t most banks are more inclined to lend money to buy a solid franchise rather than lend the money to an unknown brand new business start up.
I have always owned my own business and started it from the ground up. Since I have been reviewing franchises lately, and researched them to find some good ways to diversify my financial portfolio, I have been thinking a lot about the benefits to owning a franchise. I know there are many draw backs, but a franchise seems to make a great deal of good business sense to me. In my next posts I will be talking about the disadvantages of owning a franchise as well. After having completed research on several franchise opportunities in Denver, these are the definite advanatages that I could come up with.
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