Reasons Not To Buy A Franchise (And Why You Should Ignore Them)
Are you considering opening your first franchise, but youíre not sure whether youíre ready yet? Itís understandable. Starting any business is a massive decision to make. After all there are lots of things that could go wrong; but lots of benefits to be gained if things go right. Here are just some of the reasons why you may be put off from buying a franchise (and why you should still go ahead anyway).
1. You donít want to take risks
No matter how much experience you have of managing a business, running a franchise is never going to be risk free, regardless of how successful the franchise model is. Thatís because every business must take on a level of risk to succeed; just as everyone has to take a risk when making any other investment. Although most UK franchises achieve long-term success, a small minority may fail due to factors such as a poor location choice, inadequate working capital, a legal dispute, or other internal or external issues.
Operating a franchise under a long-established brand with greatly reduce your risks, as the franchisor will already have a strong track record of success.
2. You donít have any formal business experience
If you thought all successful franchises were managed by people with many years of business experience, youíd be wrong. One of the greatest strengths of the franchise sector is its diversity; franchisees come from all kinds of backgrounds, from experienced sole traders to graduates that have recently left university.
Some franchisors will expect prospective franchisees to have specialist experience or skills, while others will simply be looking for excellent management skills and an ambitious attitude. Fortunately, because youíll receive on-the-job training and support, youíll quickly learn about the franchisorís business model and how the brand operates so you can get your new franchise off to the best start. Many franchisors will also provide detailed guidance on areas such as marketing and recruitment, so youíll know how to promote your business and recruit the best staff.
3. You donít want to run more than one business at a time
You might think franchisees donít have time to run other operations, but youíll be pleasantly surprised to learn that many can continue other commitments while they run their business. Thatís because there are numerous franchise business opportunities that enable people to work part-time or from home. For example, someone running a home-based franchise may have much more free time to continue with another business venture, as thereís no need to commute every day.
Other franchisees may be able to run their business while studying for a qualification part-time, while others may decide to become a franchisee when theyíre semi-retired. Parents can also work part time and spend more quality time with their children, which means they can avoid having to pay for expensive childcare.
4. Youíre not highly entrepreneurial
You donít have to be the next big entrepreneur to become a franchisee. Unlike someone starting their own brand from scratch, you wonít have to spend time and money trying to convince people that a particular business model will actually work. With a franchise, you can start operating under a concept immediately and build a profitable business reasonably fast.
In fact, being highly entrepreneurial could be more of a disadvantage for franchisees, as an entrepreneur will want to run their business with their own ideas. In a network of successful franchises, however, you'll need to conform to the franchisor's business model, which will set the agenda. All you need to do is operate your franchise and make sure it becomes a profitable business.
5. You donít want to be part of a network
Unlike an entrepreneur working alone, a franchisee will be part of a supportive and resourceful network where there are opportunities to learn from other franchisees. A good franchisor will provide ongoing training and support to equip franchisees with the skills and the knowledge they need to build brand awareness in their territory and remain competitive.
6. You want a choice over suppliers
Many franchisors will only permit franchisees to work with an approved list of suppliers, as this will ensure the brandís products/services maintain minimum quality standards. While this type of franchise model may seem inflexible, the franchisee may be able to get significant discounts this way.
This is because franchisors, especially those operating on a global level, can have considerable negotiating power (or bargaining power). This means they can often win supply contracts for a much lower price than a sole trader with very limited negotiating influence.
7. You want a permanent business
Many franchise contracts lasts five or ten years, which will give you plenty of time to generate income and build a profitable business. Some people might worry that they wonít be able to renew their franchise agreement if itís not explicitly stated in the contract. However, the British Franchise Association (bfa) states that the franchise relationship should be able to continue on a long-term basis if the franchisee and franchisor discharge their obligations. If you haven't breached any of the conditions for renewal, you should be entitled to continue operating the franchise, as the franchisor will be obliged to offer the opportunity for renewal.
Another advantage of becoming a franchisee is that you can sell the business at the end of the franchise term, should you wish to. For example, you might have an exit plan to retire at the end of the contract, or invest the money from the sale on a new property or other franchise business opportunities.
8. The franchise sector is unregulated
Itís true that the UKís franchise sector is not subject to any formal regulations, as no franchise-specific legislation exists in England, Wales or Scotland. However, the franchisee and the franchisor still have legal rights and obligations which will be clearly set out in the franchise agreement.
Furthermore, many franchisors are members of the bfa, the voluntary self-regulatory body that represents the franchise sector in the UK. Over the years, the bfa has developed its own regulatory standards by promoting ethical practices and developing industry-recognised qualifications such as the Qualified Franchise Professional standard. Therefore, itís always worth looking out for franchisors with bfa accreditation when considering new franchise business opportunities.
The Editorial Team, Point Franchise ©
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