So, as we all take stock at the start of a new year, lots of very frustrated downsized executives are looking at the real possibility of ditching the job search altogether, and instead starting their own business. And one increasingly popular option for business ownership is going franchise.
But, is becoming the owner of a franchise business a good idea?
I think so. There's quite a few benefits to becoming the owner of a franchise vs. doing it on your own:
The model is already developed and tested: The franchise business model provides a proven formula for people that are interested in starting their own business. The cost of entry to use this formula is an upfront franchise fee. Once the business is up and running, franchisees pay royalties (usually a percentage of gross sales) for the continued use of the formula.
An operating system is already in place: Also known as the blueprint, this includes the franchisors operations manual that details everything a franchisee needs to know to start the business. It includes guidelines that franchisees need to follow in areas like equipment, inventory, design, branding, marketing, customer service, accounting and more.
A formal training program is included: Franchise training programs are generally top-notch, and include just about everything that franchisees need to know about opening, operating, and growing a successful franchise business.
Group purchasing power is another come-with: Franchisees of medium to large franchise systems can take advantage of the franchise's size. For example, a 200-unit franchise chain can purchase supplies that all franchisees need much cheaper than a single franchisee ever could. This buying power translates into a competitive advantage at the local level, too; franchisees can pass on their savings to their customers, while at the same time, attract new ones.
Brand recognition: A franchise system that has attained "brand status" can be pretty powerful thing. It can provide a real path to serious market share, while at the same time help franchisees increase the value of their individual businesses.
Support: Franchisors provide support to their franchisees in several ways during various times in the business cycle. Things like pre-launch support at the beginning to field visits throughout their time as franchisees are usually just part of what franchisees receive in terms of support from the franchisor.
Uniformity: Every franchisee needs to adhere to the operating procedures and rules that are spelled out in both the operations manual and their franchise agreements, so you won't have to make up the rules of the business yourself, it's already done for you.
The most obvious down-side is cost. You'll need a fairly large nest egg since owning a franchise is not inexpensive. And, just like any new business, start-up franchises don't typically make money for a while, so this may not be the best choice for people that need an immediate income. Locating an existing franchise that's been in business for awhile with revenue already coming in could work out better.
To learn more about franchising, there's a very thorough online consumer guide available from the Federal Trade Commission. The US Small Business Administration provides even more information on franchising, including details on how to apply for a small business loan.
You have been officially alerted.