Which Is Best? Big Brand Name Or Niche Franchise?

12/03/2018 18:00 | Start a business

Big franchise brands or niche brands?

In most instances, bigger means best; but does this apply to franchising?

From a security perspective, the answer is probably yes. After all, the safety net that a big brand name can offer an inexperienced franchisee is pretty appealing. However, the best franchises cannot be identified simply by looking at its size or brand name recognition. New franchise ideas can offer a higher return on investment than some famous brands.

The most suitable franchise for you to invest in is the one that has the best business model to succeed in todays competitive market by meeting consumer demands that others cant compete with. Whether this is a new franchise opportunity or a well-known brand, is irrelevant.

Things you should consider

If you're interested in buying a franchise, then you should perform research to make sure that you're investing in the right business for you. As part of this due diligence, you need to give some thought as to whether you want to be part of one of the many famous brands with global or national presence, or one thats more niche and appeals to a very specific demographic.

Here are some factors you should take into consideration before you decide:

The cost

Buying into a big franchise with a recognisable brand name will tend to cost a lot more than less famous franchises. This is because with a new franchise opportunity, the franchisor may still be building awareness of their brand name and honing their business system, and so this is reflected in the price.

Although at first, it may seem more logical to choose the lower cost franchise option, there may be additional expenses further down the line that a more established franchise may not have. When investing in a newer franchise, the cost of aspects such as fitting out premises and purchasing equipment may be higher. This is because a more established brand may have more buying power and benefit from efficiencies of scale when it comes to building work, and therefore franchise opening costs can be kept more affordable.

When considering how much a franchise is to purchase, remember to look at the total investment cost rather than just the franchise fee. This should give you a good idea of how much capital youll need to fund your franchise from launch through to profitability. This applies to any size franchise.

But remember, some things are as good as they seem. Newer franchises who want to appeal to quality franchisees that would otherwise choose a more well-known brand can do so by positioning their franchise as a much more viable option than their competitors. This allows them to get their franchised business off to a good start, which in turn helps to recruit more quality franchisees.

The risk

Buying any business comes with an element of risk, but investing in new franchise ideas can increase the odds. This is one of the main advantages of big brand franchises. Their professionalism, training, support and supply chain are often superior to a smaller, newer franchise system.

The franchisor is also likely to be more experienced and will have improved their operating system based on the mistakes that have been made along the way. By overcoming these pitfalls, the franchisor can provide a tried and tested business model, so that you don't have to make the same mistakes.

Although not always the case, newer franchises generally have fewer resources to support franchisees. And its this support that is critical to the success and longevity of the franchise system.

The level of involvement

However, with more significant risks come bigger rewards. With a new franchise opportunity there tends to be more chances to be creative and innovative. There are many examples of entrepreneurial franchisees that have worked hard, had the confidence to share ideas, and innovated to make a name for themselves. After all, the Big Mac was created by a McDonalds franchisee. Its often these brave and inventive franchisees that go on to become franchisors themselves.

Compare this to a more established franchise. The bigger a franchise becomes, the more rules there are for franchisees to comply with. The established system has decided and documented exactly how the franchise should be run in every respect. From operations and marketing to recruitment and selling. Every aspect of the business has already been well thought through leaving little room for new franchise ideas.

There may also be more opportunities for growth with a lesser known brand. Franchisees can grow alongside the business, gaining confidence and skills as time goes on. Being part of the franchise from the early days also places you in an excellent position to capitalise on any growth opportunities that come along.

You're likely to get first refusal to purchase any additional franchise units meaning your chances of becoming a multi-unit franchisee may be higher with a newer franchise.

So, is bigger really best?

There are pros and cons to both bigger brands and niche franchises. To decide which is the best opportunity for you, you need to assess various factors. These include your appetite for risk, your desire for creativity and your eagerness to take on any opportunities that may come your way.

Every franchise is looking for franchisees with the talent and capital to make their business a success. Big or small, most franchisors want all of their franchisees to succeed. You can find just as much support and passion in a newer franchise as a global brand. Take the time to consider some different options when you're reflecting on franchise opportunities.

So, whether youre looking for a big brand or a niche franchise, you can be sure that the right franchise is out there for you; whatever its size.

 

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