Small Business vs Franchise

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Small Business vs Franchise

Purchasing a franchise, like any other investment that you may make, does involve some degree of risk that needs to be considered thoroughly before any specific decisions are made. When selecting what type of franchise to buy into, you should carefully consider a variety of different factors, including the demand for whatever products and services you will be offering, what kind of competition already exists for said products and services, the background of the franchisor, and how much support will be offered to you upon venturing down this path.

Product and Service Demand

Is there already a significant amount of demand in existence for whatever products and services are being offered by the franchisor? Is there already a demand in your area or community for these products? Is this a demand that is seasonal in nature, such as products that are intended for lawn and garden care, or for maintenance of swimming pools? Are these products only going to continue to be profitable as long as they are in season, or will there be a continual amount of demand for the products of services throughout the year and over time? Is this a demand that will be temporary in nature, such as a fad food item or a new toy, or will the demand continue once the fad has passed? Is this a product or service that will generate repeat business?

Competitors and Competition

What levels of competition will your franchise face, both on a community-based and a national level? How many outlets does your franchisor own in your immediate area, including both franchised outlets and company-owned outlets? Are competing companies selling the same products or services, or products and services that are similar? How are these competing companies doing in the market? Are these competing companies well established in the area, or do they have wide name recognition within your area or community? Are they offering the same or similar services and products at prices that are the same as yours, or even lower?

Your Personal Abilities to Operate a Business

Franchise systems are capable of failing occasionally. Are you going to be able to do what it takes to operate your individual franchise outlet, even if the franchisor is unable to do so and goes out of business at some point? Is ongoing training, assistance or advertising needed from the franchisor in order to guarantee your individual business success, or will you be able to maintain your business on your own without that extra backing? Will you be able to access the same suppliers or suppliers who are offering similar products? Will you be able to conduct the business completely on your own if costs need to be cut by laying personnel off in the process?

Naming Recognition

One of the primary reasons why purchasing a franchise is such a great decision over opening one’s own business has to do with the right to associate your name with the name of the company that the franchise was purchased from. When a name is more widely known and recognized, you will find it much easier to draw in customers who are already familiar with whatever services and products are offered by your franchise location. What this means is that there are a few important considerations to make regarding the name recognition of your franchise:

  • What is the name of the company, and how widely known and recognized is it? Is there a registered trademark in place for this particular company?
  • How long has the franchisor been in operation so far?
  • Does the company have a good reputation for providing quality services and products over time?
  • Have consumers filed any complaints against the franchise? You may want to check either a local consumer protection agency, or the Better Business Bureau.
    Support and Training Services – Another thing that makes purchasing a franchise much safer than creating your own small business has to do with obtaining support from the franchisor. What types of training or support is your franchisor going to provide to you? How does this level of training and support compare to what is normally offered to traditional workers within the industry? Will you be able to compete with companies headed by people who have received more formal training within the industry? What types of backgrounds do current franchise owners possess? Is a specific technical background needed in order to help you succeed, or can you succeed without one?

Experience of the Franchisor

Many franchisors are capable of operating companies that are well established based on many years of selling services and goods, and many years in the business of franchise management. Many franchisors have begun their career by creating and operating their own businesses. There is no real guarantee, however, that an entrepreneur can successfully manage a particular franchise system, no matter how successful they have been with their own business ventures in the past. How long has the franchisor been managing this particular franchise system? Do you feel that you could be comfortable with the amount of expertise and experience that this particular franchisor has? If the franchisor in question has too little experience when it comes to managing a particular franchise chain, will their guidance, training and support really be as reliable as you need them to be?

Growth of the Franchise

You may be able to attract additional companies when the name recognition of the franchise is increased through the natural growth of a franchise system. Growth alone, however, is not enough to ensure success of the franchise. A company that is growing too quickly may be unable to properly support all of its franchisees with whatever support services have been promised to them. You need to be sure that the franchisor in question has the right amount of financial assets and support staff to keep the franchisees supported no matter what level of growth occurs.

Is franchising the right opportunity for you?

Are you the type of person who thrives on owning your own business, or on being your own boss? Franchising may be the right opportunity for you if these things are true. There are many varied opportunities that are available to you in the world of franchising, which draw people in from all walks of life. Franchises are being purchased every day by a multitude of different professionals and corporate people.

Franchising is an especially attractive proposition because it offers great business opportunities to people from all walks of life, even those who are limited in the amount of capital or experience that they can put into it. The potential amount of income and personal growth that are available from a reputable and established franchise far outweighs that which can be obtained through venturing out on one’s own to open a small business.

Franchising, however, is not for everyone. Some people simply cannot adjust well to the setting created by a franchise business. Most franchisors have established their own sets of rules and standards, and decisions may be made for a franchise owner that they simply are not happy with, or that they do not agree with. Before you invest in any potential franchising opportunity, you must make absolutely sure that you understand the model created by your franchisor and that you agree with every facet of it before proceeding.

Above all else, what a franchise can do for you that a private business cannot do is offer you a fully functioning, tried and true business system. Rather than spending thousands of pounds setting up your own personal business model, you can get in on the ground floor of a concept that has already been established. This therefore means that there is a lot less money and a lot less risk involved overall. As many as eighty percent of all new business startups will fail within the first year. By buying into an already successfully functioning business model, you will already be much further along the process than the average new start up company, which can mean a lot for ensuring your success and generating profit. Association with a large company, such as a fast food chain, will almost certainly ensure that you benefit when opening your own franchise for the company.

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