Why Buy a Franchise
Going into business for yourself requires a high level of risk many people are not willing to take. Often you must risk your home and other personal assets as collateral for a loan needed to fund your venture. One of the best reasons for buying a franchise is the lower risk level associated with an established brand. Of course not all franchises own an established brand but most offer some sort of turn-key operating system. The following are some of the advantages of buying a franchise system.
1. Branding - If you are going to open Bill's Sub Shop, you know you are going up against Subway, Jersey Mike's, Firehouse Subs and other established brands. Many of these national brands are already providing advertising in the form of T.V., radio, internet and print to name a few. Their name is already recognized which automatically draws customers in the door. Bill's Sub Shop is going to have to build it's brand and pay for the advertising to compete with the national brands. These national brands have something else in common: they are franchises with a network of franchisees all helping to build that brand and pay for that brand recognition. Branding is a huge reason to open a franchise versus your own small business.
2. Operating System - Most franchises offer an existing and proven operating system in the form of proprietary software and paperwork used to operate and monitor the business. The operating system usually includes manuals telling you how to run the different facets of the business. This turn-key system is made to simplify the operation of the business and allow most people the ability to be successful. When you are starting Bill's Sub Shop, you will need to design your own logo, paperwork, inventory system, financial calculators and much more that will allow you to successfully and profitably operate the business. Most franchises already have these systems set-up with instructions on how to do everything. It is usually much easier to start a franchise business for this reason. In addition, a Franchisor is going to provide you with everything you need to start your business including equipment, product, paperwork, etc.
3. Track Record - Many franchises have been around enough to have a track record of success or failure. Whether a Franchisor has 10 franchises or 1000, the number of operating units provides a track record in determining the success of the system. Franchisors also must provide a Franchise Disclosure Document (FDD) to prospects which contains contact information for their franchisees. What better way to determine the odds of success then to contact those already operating the business? The longer a Franchise has been around and grown, the more information is available to judge the opportunity. Bill's Sub Shop has no track record so who knows if it will be successful.
4. Support and Training - Franchisors typically have a staff that provide initial and on-going training as well as support staff to assist you. Their staff is there to help you, answer questions and make sure you are following the system. They usually provide branded advertising material and have policies and procedures that allow for the successful operation of all franchised locations. Bill's Sub Shop isn't going to have a system of fellow franchisees to call upon or even a Franchisor to help answer questions. It's an uphill battle for Bill.
5. Franchisee Network - There is a huge advantage to having fellow franchisees. You can call upon these franchisees for advise or best practices which speeds up the learning process and increases profitability. Many Franchisors will have an annual convention where franchisees can network and attend workshops and trade shows. Again, more chances to meet top performing franchisees and learn what they are doing to be successful. Bill's Sub Shop doesn't have a network of fellow sub shop owners to call upon so Bill is on his own to figure things out.
6. Equipment and Product Discounts - Many Franchisors can utilize their volume purchasing and pass these savings on to their Franchisees. This means you may pay significantly less for your equipment and product then your competitors which allows you to charge less or make more profit. Either way it's a competitive advantage that puts money in your pocket. Bill's Sub Shop is going to have to pay full price of everything because he doesn't qualify for volume discounts.
As you can see, there are many advantages to buying a franchise. Sure, you do have to pay royalties but based on what you get, usually it's money well spent! Franchises are known for offering turn-key operations that speed up the initial set-up and business learning process. They also offer many financial advantages as well as a recognized brand. All of these lower the risk associated with new business start-up's.