Concept behind Franchising : What is a franchise business ?
Franchise is a ready-made business concept with an already tested working business concept. With such a concept, you can avoid going through the difficulties and mistakes that so many new entrepreneurs are forced to go through due to lack of experience. A concept that may already have a well-known brand with a well-established customer base.
These are some of the benefits of franchising. If you are thinking of starting your own business, maybe a franchise is for you! Franchises are found in almost all industries such as grocery, retail, hotel, restaurant, consultant, service company, broker, IT, wholesale, advertising, transportation, service, exercise, health, non-durable goods and much more.
Franchising is a concept that in most cases already has a well-known brand with a well-established customer base. These are some of the benefits of franchising. If you are thinking of starting your own business, maybe a franchise is for you! Choosing a franchise is a safe way to start your own business.
Franchise Business: Pros & Cons
Benefits of franchise
Economies of scale – The franchisor takes responsibility for the tasks that can be done for many franchisees at the same time. In this way, the franchisee gets more time for what requires presence and closeness to customers. In addition, you are not alone but are part of a network of franchisees who become your colleagues.
Proven profitable idea – You take part in a proven and functional business concept and know that if you run the business correctly, there is a profitability.
Turnkey company – The entire business is already finished with assortment / supply, marketing, IT systems, etc. This saves you valuable time and money in the long run because you avoid trying roads that do not lead to increased profitability.
Support – The franchisor offers training, coaching and advice on how to run the business in the company. You develop in your role as a franchisee and this is positive for your business.
Higher efficiency – In a chain, you take part in purchase prices, customer agreements, marketing, etc. that the individual entrepreneur can rarely or never access on their own.
Networks from other franchisees – In a chain, you are never alone but can contact other franchisees in the chain and get tips, advice and support. You are self-employed but at the same time get important “colleagues” who create a sense of community.
Prepared budget / calculation – When you start your own company, there are many questions that must be answered, including what your services / products should cost, but here you get help with this. Feeling financially secure through professional support increases your chances of success.
Help with marketing – Where, how, when and in which channel to market yourself, here you get help and support on which channels work best in terms of marketing. You always have someone to ask to achieve the best possible results.
Challenges for franchise Businesses
- It’s hard work, especially the first time : This applies to everyone who starts their own business, regardless of whether it is a franchise or not.
- You take financial risks, you tie up equity and borrowed capital in the company. Making a sustainable budget is the A&O for those who want to succeed. The investment is well worth it when you see what a dividend you can get.
- You take great responsibility and often have to make decisions that are important to other people. As a franchisee, you get help and support from the franchisor in many matters, but you must be prepared to take responsibility for the decisions yourself.
- You have a somewhat limited freedom: It is important to remember that the franchisor has the rights to set the limits for how you can run your business. However, this can be seen as an advantage because the concept is well proven and gives you the tools to succeed with your business.
- You must pay royalty / franchise fee to the franchisor : This is a cost that is important to budget for when calculating your profits. You should compare the franchise fee with what it would cost if you did everything yourself, if you come to the conclusion that it will be cheaper to do it yourself, you should start your own, but if you come to the conclusion that it will be more expensive to do it yourself, it is thumbs up for the franchise concept and you thus get a profitable, safe and functional concept.
- Starting your own business is always hard work and involves financial risks, regardless of whether you choose to start completely on your own or become a franchisee, but in a chain you get help and support and the risk is somewhat less when you become a franchisee in a chain.
This is how franchising works
In short, franchising means that someone (the franchisor) has a successful business idea and a business concept that others are offered to take part in. Franchising occurs when the franchisor leases or leases the right to its trademark and operating methods to one or more independent franchisees. The concept developed by the franchisor must be used throughout the franchise chain to create uniformity and economies of scale. Franchising is not a legal definition but primarily a business concept.
Franchisor (FG) : The franchisor is the one who owns a business concept that they offer others to rent for their own business. Traditionally, franchisors were restaurants and other service facilities, but today there are franchisors in all industries.
Franchisee (FT) :As a franchisee, you run your business in your own company, but with support from the franchisor. You rent a turnkey and proven successful business concept where there are instructions and ongoing advice on how the concept should be conducted to be successful.
Benefits of being your own in franchising
Once the company is up and running, you have great opportunities to control your own working hours. This leads to a freer life where you can spend more time on what you value.
You have the opportunity to create the conditions for a higher salary. This gives you the chance to invest in a secure future for you and your family.
You have endless development opportunities when you run your own through franchising. The concept is well proven and offers products or services that most people have an interest in. There are examples of franchisees who run more than one unit or are responsible for franchisees in many cities. Your franchisor is there as a support when you want to expand.
You develop as a person in your role as a business leader. As your business grows, you will have more and more employees. Franchising then and now the term franchising originally comes from the Latin franco, which means freedom, right or privilege. The system of using independent salesmen to broaden their distribution and increase their sales was born already during the Middle Ages. But then the system was probably called something other than just franchising. The basic idea still lives on today, but much has happened since then.
Franchising is an international concept and an international phenomenon. The pioneer country in modern franchising is the USA, where the breakthrough came with the company General Motors in 1898. General Motors began by hiring dealers who bought the right to sell the company’s products without General Motors themselves having to invest financially in the dealers’ operations. This business method proved very successful and the idea spread quickly all over the world.
Industries that offer franchising
Today, franchising exists in virtually every industry. Franchising is also an international concept where franchisors are often found in several different countries. You can see examples of companies that offer franchising here
The opportunities for those who are interested in starting up a franchise business are great today. The companies that offer franchise opportunities are well-known names that most consumers are already familiar with. The concept exists in most industries, so no matter what you are interested in working with, you have the opportunity to do so within the safe framework that franchising offers.
Keep this in mind when choosing a franchise company
The conditions vary. Each franchisor has their own agreements that are offered to those who want to become franchisees. What applies in one industry does not automatically have to apply to another industry. Therefore, it is important that you read about the industry you want to run a franchise company in.
Networking is positive : Find out more about the franchisor you are interested in by consulting among those who already run companies there as franchisees. You can always learn from others with more experience.
Make sure you have a solid legal foundation to stand on. As with most contracts, it is smart to hire a legal expert before signing your contract. Then you increase your chances of succeeding in your business.
Dare to ask, Franchisees are concerned that those who run franchise companies under their flag should feel secure and reach their full potential to succeed. Make sure your vision is clear even before you decide to invest wholeheartedly.
Choose the company you feel passionate about. As a business leader, you need to stand behind your product or service one hundred percent. Then you can also enthuse your employees and potential customers
With Startup Authority, you get advice and help on how you should think before choosing your franchise industry. Through our popular information evenings, we also connect franchisors and franchisees around India. Here you will find inspiration and the concrete tips you need to succeed in your career in the franchise.