If you’re considering becoming a franchisee, you may have found yourself wondering what the safest franchise option is: a big-name brand or a smaller, more niche franchise. The answer depends on your priorities. Here are some of the key factors you’ll need to think about before making your decision.
On the surface, you might be tempted to assume big-name franchises will always be a safer choice. After all, one of the biggest advantages of the franchise model is its ability to allow new investors the chance to launch businesses under recognisable brands. But, in reality, both types of franchise have their advantages - and disadvantages.
If you’re wondering how to choose a franchise brand, the best way to make your decision is to consider your own situation (more on that later). But before we go any further, let’s explore some of the main differences between big and small franchises.
The benefits of a niche franchise vs. a big-name brand
Here are some factors you should take into consideration before you decide:
Niche franchises: In most cases, smaller, more niche franchise opportunities come with a lower price tag than high-profile investment options. However, lower-cost openings may involve additional expenses further down the line. While a large franchise might have increased buying power and the ability to gain supplier discounts for franchisees, newer businesses may not offer these financial perks.
Big-name franchises: Buying into a big franchise with a recognisable brand name usually costs a lot more than joining less famous franchises. Newer businesses might still be building awareness around their brand name and honing their business systems, which is reflected in the price.
Niche franchises: As you’d expect, the more money you invest in a business venture, the more risk you’re taking on. So, low-cost, niche franchise opportunities give franchisees a chance to become their own boss while limiting their financial responsibilities.
Big-name franchises: As most investment opportunities with famous franchises cost hundreds of thousands, or even millions, of pounds, investors must expose themselves to a significant level of risk. Most big-name businesses offer existing customer bases and extensive support, but if your unit does fail, you’ll lose a lot of money.
Niche franchises: Buying any business comes with an element of professional risk, but investing in new franchise concepts can slightly increase the odds of failure. Although it’s not always the case, newer franchises generally have fewer resources to support franchisees, which can affect the success and longevity of the business.
Big-name franchises: Established companies often have superior supply chain arrangements, higher levels of professionalism and more extensive training and support opportunities compared to smaller, newer franchise systems. The franchisor is also likely to be more experienced and will have refined their operating system based on mistakes they made over the years. Being able to use a tried and tested model significantly lowers the level of professional risk for franchisees.
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Niche franchises: New franchises usually provide more opportunities to be creative and innovative. There are many examples of entrepreneurial franchisees who have worked hard, shared ideas and shaped their franchise; for example, the Big Mac was created by a McDonald’s franchisee. It’s often these brave and inventive franchisees who boost their profits and go on to become franchisors themselves.
Big-name franchises: Franchises rely on consistency across the network. The bigger a franchise becomes, the more rules there are for franchisees to follow, as previous successes will have shown exactly how the franchise should be run. Every aspect of the business will have already been thoroughly considered and tested, from products and operations to recruitment and marketing, which leaves little room for franchisee input.
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Niche franchises: If a business is fairly young and hasn’t established a great training and support programme, franchisees may not benefit from the high-quality guidance they would get at an older franchise. But on the flip side, franchisors with a relatively small network of franchisees may be able to provide one-to-one meetings and professional development sessions more often.
Big-name franchises: Large businesses with big reserves of capital are more likely to offer extensive support schemes than younger companies. In essence, the more money franchisees contribute in ongoing royalties and other fees, the more resources the franchisor can provide.
Niche franchises: Franchisees can grow alongside the business, gaining confidence and skills as time goes on. Being part of a franchise from its early days provides the opportunity to capitalise on any growth opportunities to come along. You might even get right of first refusal to buy other nearby franchise units, so you may be able to secure additional territories in convenient locations.
Big-name franchises: While new, niche franchises have space to grow, big-name companies may already occupy as large a market share as they’ll ever be able to. Also, recognisable brands usually have lots of franchise units in operation, so buying additional territories near your site could be difficult, unless an existing franchisee sells their unit.
What’s the best franchise option?
Unsurprisingly, there’s no right answer. The best franchise for you will depend on your experience, goals and budget. Great businesses succeed in today’s competitive market by developing operational models to meet consumer demands more effectively than their competitors. Whether they are new or established is often irrelevant.
So, how do you decide? If you have the capital and are comfortable balancing high financial risk with low professional risk, a big-name brand could help you reach impressive profitability and brand awareness. If not, or if you’d prefer to invest a smaller amount of money, you should be able to minimise your outgoings, limit financial risk and reach your break-even point sooner.
Your decision should also depend on your priorities. Sometimes, the best franchise for you isn’t necessarily the most expensive one. If you’re looking for a part-time, mobile or home-based business opportunity, you’ll probably only need to invest a relatively small sum.
How to choose a franchise
At Point Franchise, you can filter the investment opportunities currently on offer by geographical region, investment cost and industry. Just use the main menu to start looking for your perfect venture.
The Editorial Team, Point Franchise ©