Why You Should Buy a Franchise Instead of Starting Your Own
Hoping to be your own boss? One franchise expert outlines the plus side of buying a franchise
The following excerpt is from Rick Grossman’s book Franchise Bible. Buy it now from Amazon | Barnes & Noble | iTunes | IndieBound
Very few people have the natural ability or expertise to be efficient at all aspects of running a successful business. That is where the franchisor’s experience comes into play.
Franchise organizations offer a structure for launching, operating and growing a business. Indeed, the successful franchisor will deliver the entire framework around which the business is built. Franchisors usually create comprehensive operations manuals and training programs for their franchise owners that cover marketing, operations, accounting, technology and other areas that are specific to the particular business model. These efficiencies are designed to enable franchise owners to earn more and spend less time and effort than otherwise would be required to open and operate a similar business on their own.
The franchise organization model offers the franchisee the ability to grow under a common brand and share in the benefits of a larger group of business owners. Though each business is independently owned and managed, all franchisees share in the collaborative benefits of the organization through the support and oversight of the franchisor including:
- Group advertising resources not typically available to small, independent business owners
- Owning your own business and making day-to-day decisions yourself, guided by the experience of a successful business enterprise
- The ability to sell products and services to markets that company-owned outlets have difficulty serving because of higher operational costs and lower motivation of employees in company-owned outlets
- The benefit of recognized and proven service marks, trademarks, proprietary information, patents and/or designs
- Training from successful business operators
- A lower risk of failure and/or loss of investments than if you were to start your own business from scratch
- Being a part of a uniform operation, which means all franchises will share the same interior and exterior physical appearance, the same product, the same service and product quality and overall customer brand awareness
- Operational support from the franchisor, both before and after launching your business venture, in areas such as financing, accounting, employee training and operational procedures
- An opportunity to enhance your management abilities within an established business model that you couldn’t experience in most employment situations
From the franchisor’s perspective, this collaboration:
- Offers the franchisor a method of rapid expansion
- Spreads the brand messaging and awareness over a large network of franchise owners
- Taps in to the franchise owner community’s “pride of ownership”
- Allows the franchise owner community to grow due to a duplicable system and support
- Features increased buying power for goods and services due to higher volume with suppliers
- Enables new products and services to be developed in the field with more testing and input
- Provides a steady cash flow to the franchisor to facilitate overall growth of the system
- Can fund the brand recognition effort to grow nationally and globally
Franchising offers a better chance to succeed
The U.S. Department of Commerce and other authors of statistics concerning franchising have shown that the revenue from franchise establishments accounts for over one-third of all U.S. retail sales.
According to studies on the economic impact of franchises, franchise businesses produce over 3 percent of nonfarm private output in the United States, and when the total contribution of franchise businesses was considered (which includes the goods and services used or purchased by franchise businesses and their employees), franchise businesses account for approximately 9 percent of nonfarm private output in the United States.
Government research over the years has indicated that the success rate for franchise-owned endeavors is significantly better than the rate for non-franchise-owned small businesses. In short, the good news is that franchising makes up a significant part of the national economy and presents a statistically better chance for success than other business options.
The freedom factor
Most individuals seek three common elements when choosing a franchised business:
These three elements are important for a variety of reasons and seem to be common denominators when people seek a new business as a career path. Flexibility has always been a hot button for entrepreneurs who exchange the stability of a “real job” for the freedom that comes with being their own boss. Money, or income, is always a factor but surprisingly is seldom the most important. We know many people who have left huge salaries behind because they were miserable, to pursue the American Dream and launch a business. Status is an all-encompassing category that includes not only titles and position, but more important, the feeling of purpose one has and being a part of something significant.
Owning a franchise can provide you with all three of these elements if you operate the business successfully and manage your time and resources properly.
Happy franchise owners make more money
It’s been said that if you love what you do, you can’t help but succeed. There’s a lot of truth to this statement. If you can align yourself with a franchise that really fits, you’ll be much happier, which in turn results in higher productivity. This is a simple philosophy that’s often overlooked. Some franchise organizations have suffered because they lost sight of this reality during the fast growth stages.
The explosive growth that many franchises experience is referred to as “hockey stick” growth due to the way it’s charted on a line graph. Sometimes companies are so successful and grow so fast that they seemingly forget about the little things that made them successful in the first place. In this case, their initial success can lead to their ultimate failure. A franchise organization that forgets that their franchise-owner community is in fact their “customer” base (each of whom should be treated with respect and with an eye towards making them satisfied) usually comes down like a house of cards.
Think about this for just a moment: If the franchisor understands that its franchisees are the heart and soul of their success and understand a very basic premise -- if the franchisees are happy then they’ll generate more revenue -- then it will build on that reputation and financial model. But if the franchisor sees its franchisees merely as cogs in a wheel that deserve no respect, the system ultimately fails -- and not because the end product is poor, but because the sales force that’s presenting the product to the general public is dissatisfied. We see this all too often.
As you evaluate franchise organizations, be sure to investigate their commitment to their franchise owners, as well as their future development plans to enable their franchisees enjoy continued growth and success.