The economic climate has devastated many businesses. It isn’t just small firms that have suffered or gone into administration over the last five years; surprising casualties of the depressing state of the market have included high-street stalwarts Comet, Woolworths and Jessops.
However, some businesses have gone from strength to strength during that same period. Household brand names such as Subway and McDonalds are turning over record profits and both are franchises.
A safe business model
One of the many benefits of buying into a franchise rather than branching out with a new brand is that there will be a well- established business model already in place. This factor removes many of the worries that can be experienced by those undertaking a new business, such as concerns about whether the format will be enjoyed by the potential client base or supported by future financiers.
With a franchise, there is a certain amount of existing confidence in the brand which leads to both a higher likelihood of achieving the required level of custom earlier in the business and of obtaining any financial support, should you decide to approach investors. This pre- existing confidence is virtually supplied as part of the franchise package and offsets many concerns that have been exacerbated by the economic downturn.
Support and structure
Unlike those who set out to build up a business using their own new model, a franchisee can draw upon a wealth of advice and support from the franchisor. Although it is sometimes necessary to alter some details of the franchise strategy to fit in with local conditions, the fact that there are tried and tested practices relating to the business gives the new owner a reliable structure upon which to build.
A franchisor can, and often will, provide the franchisee with a template for managing the business: this can include such things as franchisee training days or bespoke software and can remove potential concerns about such issues as rates of pay, management obligations and sourcing raw materials or ingredients.
Support would not only be available from the franchisor but also from those already running a franchise. The advice of somebody who has experienced setting up and maintaining a similar business would be invaluable and highly relevant. It can enable you to decide whether to go ahead with a purchase and warn you of potential pitfalls that could jeopardise the success of the franchise.
Planning ahead
Undertaking a new business is never entirely risk-free, but the usual risks have increased considerably in recent years. As a result, it has become even more necessary to investigate business options thoroughly.
For example, it is vital to discover the size of the market, how other similar businesses are progressing in the area and the extent of existing competition, regardless of the kind of business you are hoping to start. But if you are considering buying a franchise you have the advantage of having access to a great deal of information relating to businesses that are highly similar. While it’s important to carry out due diligence to ensure the market is not saturated with businesses offering the same goods or services, you will at least have assurances regarding other outlets of the same franchise.
With the cooperation of other franchisees, you can access figures for premises in similar socio-economic areas, which can be reasonable indicators of how your own franchise might fare.
Going against the grain
All of these factors – strong confidence in an established model, a ready-made start- up procedure and the facility for better performance prediction – lead to a greater level of trust in franchises. Customers are more likely to spend their meagre resources on a product they know they enjoy, lenders are more likely to take a chance on a business model that has a good track record and entrepreneurs are more likely to risk undertaking an enterprise that has so many built-in fail-safes.
It’s no surprise that a survey carried out by the British Franchise Association in conjunction with NatWest discovered that over 90% of franchisees reported that they were in profit.”In business, there is no such thing as ‘a sure thing’ and many businesses have discovered that fact the hard way over the past five years.
In these tough economic conditions, it’s vital to leap upon every advantage that comes your way. A franchise provides many of those advantages. Use the additional confidence it provides to procure the best supplies you can afford, to secure financing at the best rates available and to establish your new business with as wide a client base as possible as soon as you can.
Accept every offer of information and help that is made by the franchisor and other franchisees to give your business the best chance of success. Lastly, never forget that your aim is to provide a service, so keep listening to the customer and you, too, could become part of the great franchise success story.”
