In the world of franchise business, the franchisor gives you the entire process of running the business, tells you the ongoing success methodologies, the systems and the help needed to make profits and grow your new venture.
The current landscape of investment raves about the franchise businesses, providing you with the new era way of becoming a successful franchise business owner, without having to create its image from scratch. It is undeniably true that there are huge advantages in the aspects of capital investment, growth speed, driven management and risk reduction, and many more that we discuss in this blog.
Capital is the first step in the world of business, it is plausibly the biggest determining factor in the volume, scalability and the resources allocated to your venture. It is also something the modern scenario is highly deprived of, with the growth of small and medium sized businesses entering the market, they find sourcing massive funds and resources less possible now.
Franchising on the other hand is a great alternate to capital acquisition. Since the franchisor has already setup the Operational method the Capital Investment in a Franchise is limited and controlled hence it is much easier to expand the business without the risk of running up a huge debt or incurring equity costs.
In terms of liability too, the franchisee gets a whole lot of liberty for expansion without the contingency of the risks that come along with it. Hence, being a franchisee would essentially require a lot less capital commitment with the risks only limited to the capital you will be investing in the franchise acquisition and setup – which itself is much lesser than the costs of starting your business from zero. Your Capital is way safer than a start up business since you are investing in a known business model which would already be delivering in various other parts of the same country or in another Country. It is a Tried and tested model.
Building a core team for your business and hiring the employees that truly strive for the company goals can be another roadblock in erecting new ventures for entrepreneurs. It can take months on end for business owners to train unit managers, and watch them leave your company for your competitor’s.
When you start a Franchise the owner is the Manager and gets to hire a team of people only needed for operation and execution which is far simpler and less time consuming. The Franchisor would have the team of people set to provide the Ongoing Developments and sales pitches which will smooth out operations. All operations will be well laid out and it would only need proper dedicated following of the laid norms to achieve Operational Success.
This helps you to cut down on training time and investing time and money on trainings as most of the trainings are done by the Franchisor and helps keep your staff motivated. Man Management becomes easier as everyone is aware of the work areas and hence you have a motivated staff at your disposal.
Better than a start-up
Start-ups saw a growing fandom a decade ago, due to their newer ways of running your own empire and providing the world with new ideas and services like never before. However, this bubble popped and saw a great decline due to the increasing amount of young entrepreneurs not being able to rake in profits or even breakeven figures. When you look at the franchise market, you will realise that such risks are already minimized, as the franchisor has tested the waters and calculated the risks that are needed to evaluate the scope of a business in the current market scenario.
This is highly advantageous because you are benefitting from these series of efforts, wherein your minimal investment can end up making you resourceful in the future. These resources are not just limited to finances, but also the general business competencies and future trends, where you can expand your network better without worrying about half as many risks as a startup can provide.
Secondary & Tertiary market penetration
A majority of the franchisees operate on a unit level financial scale, where they can make higher or lower profits depend on how they distribute the profits that come in. One might overstaff the place and make peanuts, or distribute the work across hardworking individuals and make a higher cut than a general manager, since he can put a close watch on the expenses that happen in the premises.
Moreover, when you take over your franchise business, you can determine what kind of corporate environment gives you the likelihood of success. When you don’t have to spend all of your capital on the running costs of the place, you can allot your profits for multiple outlets, since you do not have to pay the entirety of the costs of the current venture. This flexibility is the key factor of scalability, not only in terms of expansion, but also for penetrating more viable markets.
Reduced risk factor
In general, running your own business has a lot more liabilities and risks than it ever did before. Like it or not, if you are the sole proprietor of any said workspace, almost everything that goes wrong inside can get you in trouble. This exact problem can be naturally curbed by franchising, as it reduces the liabilities that are bestowed upon the franchisor.
The franchisee lays the blue print of all the things like- leasing the equipment, managing the physical location and also how the business would work, you would be at an advantage as you do not need to think, hunt or source. All this is already done and ready for your use. You do not need to worry about how the starting process will be or how you would get your customers. All this is all worked out in a franchisee situation and hence the only thing that you need to get done is get the Operational equipments / place and people in place as suggested by the franchisor and you are ready to start.
When you combine all these great factors, it makes for a very attractive idea for new investors. The community expands as new Franchisees sign in for new areas and a Network of like minded people is formed which allows healthy exchange of Ideas.