While many of us dream of starting our own business, the act of quitting the nine to five and striking out on your own can be a terrifying prospect. You are leaving a comfortable, reliable, predictable once a month paycheck for a more unpredictable, anxiety inducing, no boundaries lifestyle where the full responsibility is on your shoulders.
Yet the rewards can be so much greater – which is what drives a certain type of person to take that plunge. Growing a business from scratch means that you will go through a cycle of challenges whereby the stresses get greater, but so do the financial benefits.
But to get to that stage you need an idea, and a business. And franchising is a way forward for thousands who have the drive and a passion for a particular area of expertise.
Famous examples of franchises
A franchise is fundamentally a business in a box. You are buying a business which has already established a name with a proven operational model. The most common examples that you will no doubt recognize are McDonalds, Subway and Hertz.
Such established brands require a significant upfront commitment. For example, if you were to invest in a McDonalds franchise, you would have to demonstrate a unencumbered funds of at least £100,000, as well as showcase your leadership abilities. The actual investment in the restaurant and equipment can be between £350,000 and £1.8 million depending on the size and location. However, turnover can total up to over £4 million.
Benefits of investing in a franchise operation
Not all franchises are as expensive as McDonalds – there are those that can cost as little as £300. However, the level of investment will usually reflect the potential income so it is advisable to do your homework and weigh up the pros and cons when selecting a suitable business venture.
Other benefits include:
When you are buying into an established business model you are buying into strategies and systems that have already been proven to work and be successful. To get to the point at which you can start successfully trading is literally a case of going through the training and putting those systems into operation in your own chosen area.
As well as the training, you can also invest in the ‘package‘ of equipment. Whether it is a car valeting equipment package, a supply of product, or a fully fledged restaurant, your franchise owner should supply you with everything that is necessary to allow you to start operating your business from day one.
Marketing materials and support
Your franchise operation should also supply you with a full range of marketing materials and leads. Generally the company will carry out nationwide marketing and advertising campaigns to generate awareness and promotional opportunities. Some franchises will gather sales leads and redistribute them to region specific franchisees.
Ready made community
This might be your business, but you have access to an existing community of other business owners who have all been in exactly the same position as you, and will be able to give you the benefit of their experience. Loneliness and isolation is often the biggest challenge for new business owners, and becoming part of a franchise operation is an immediate solution to this.
As part of a wider organization your buying power will make a significant difference to your direct and operational costs. Many organisations will expect you to purchase only from their head office. This not only guarantees a consistency in pricing across the entire organization, but it also guarantees a consistency in product quality.
Opportunities for rapid expansion
If you are ambitious enough then your opportunities for growth are significant. Most franchises will not limit you to one franchise. As a proven franchisee you can invest in a chain, which obviously gives you the chance to scale your business quickly, giving you that financial success that you will never get as a cog in the wheel of a nine to five operation.
Disadvantages of a franchise
As well as an overwhelming number of positive advantages when buying into a franchise operation, there are also a number of disadvantages, restrictions and regulations which you need to be aware of – although you may be your own boss, you are not specifically in full control of your business, and will need to tow the line in a number of different areas.
If you are investing in a particular brand, that is because you have recognized the success of that brand. However, it also means that you have absolutely no freedom of expression in terms of developing your own creative identity.
And this is not just down to the creative marketing aspect – it could also apply to other areas of your business, such as the type of vehicle you drives, the opening hours you operate, the type of service you offer. If you are keen to flex your creative and marketing muscles, and see opportunities which an existing franchise operation is not fulfilling, you may be better off launching your own from scratch – the risks will be bigger, but the rewards will be all yours.
There can be a severe lack of financial privacy and freedom for many franchisees. Often as part of the package you are expected to commit a certain percentage of your income back to the franchiser, and you are expected to purchase all marketing collateral at a price set by head office, with no opportunity to seek comparable costs.
Consequently the potential for conflict within a national or international franchise operation is considerable. It is for this reason that many companies are incredibly strict when it comes to protecting their brand and intellectual property, and why they thoroughly vet any new franchisee applications. To mitigate the risk of potential legal battles a franchisee needs to demonstrate not just that they have the capital investment available, but that they also have the right mindset as well.