Although franchising or buying a franchise is not a new idea or process of conducting business, it is still proven in most cases to be the most cost effective. It does not seem to matter if you are the franchisee or franchisor, becoming a part of the franchise industry has numerous advantages and can eventually become a brilliant investment for each party, so long as the business model is strategically correct.
For the franchisor, his quickest and most productive method of establishing their business nationally or globally is through franchising as it may well be the brand’s fastest route to market. They are able to profit from the initial level of investment that is constructed within the franchise proposition. The franchisor can also use funds from royalty fees to enhance the product, attracting more business.
Franchisees are at an advantage in a different sense. They are able to build a business that has already been through a series of trial and error, reducing the level of risk. They will be joining an existing network and can run their business under the brand name of the franchise. Franchisees are in a better position than if they went at it alone as the brand will have already been established to some extent, making it easier for the franchisee to break into their new business.
This however does not mean that you can choose any franchise and it will instantly become profitable. It is imperative to do research and find out what makes a good franchise and why it is worth your investment. If the franchise is to work, there should be a pilot study taken place beforehand to outline the overall reception of the product that is being franchised. There is no point in investing in something that has never been run as a business initially as there will be no guidelines or formula to work with.
If you are considering becoming a franchisee, it is important to delve deep into the franchise opportunity and evaluate whether you are getting value for your money. Assessments should be made about the franchise’s place in the market. If you think you will be in the same market position by using the investment capital required towards your own business then there is absolutely no motive for you to join the franchise as it has no commercial value to it. If you think you cannot achieve the market position on your own, it is more than likely that you have come across a viable franchise.
The franchisor should highlight key advantages of their business against competitors who are starting out and are at their early stages of development. The franchisor must ensure that there are unique selling points that differentiate the franchise from other contending franchises in order for it to grow and sell regardless of competition.
The most successful business start ups are businesses that are franchised and are often the most lucrative resulting in global establishment of the company, bringing brand awareness to consumers. Provided there is a winning formula in place from the outset, franchising a business should be financially rewarding.