If you’ve ever run a business, you know that it’s a monumentally difficult challenge. Entrepreneurs have to handle uncertain market conditions and maneuver their business through difficult times in order to try and make a name for their brand. Nowadays, many of these entrepreneurs are opting to buy franchise businesses instead. It’s no wonder, as franchises come with many benefits that would be attractive for an up-and-coming business owner. If you’re aiming to run a business, there are a number of reasons why you might want to consider franchising ie. to buy a franchise business.
Why to buy a franchise business?
- Why to buy a franchise business?
- The odds are good
- Financing is a breeze
- It comes pre-organized
- The brand helps build the location
- Negotiation is settled
- Help is always close
- Conventions are open
- You can stay up-to-date
- Calculating ROI is a breeze
- It’s a transparent investment
- Owners get financial assistance
- There is power in numbers
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The odds are good
Countless businesses fail within the first few years of opening. Depending on the industry, up to ninety percent of new businesses will go under before they even reach their second year. Restaurants are especially infamous for being difficult to maintain for longer periods. The tough years are as tough as you might expect, possibly even more so.
Franchises, on the other hand, get much better chances. Statistically, a franchise is five times more likely to make it past the ten-year mark compared to non-franchise businesses. This could be due to the brand recognition or it could be the simple and pre-determined organization of the business. Either way, the odds are very much in your favor if you choose to run a franchise.
Financing is a breeze
Getting access to adequate financing is a difficult task for any business. It's particularly difficult for standard independent businesses. Banks aren’t always going to like your business idea, nor will they agree on its potential for success, no matter how good your arguments are. If they don’t have a reference to go on, backing your business isn’t going to be their priority.
Franchises are a bit different. With a recognizable brand name, a business is a lot more likely to get the financing it needs to start operating. Banks are a lot more comfortable loaning to franchises, as there are numerous other establishments that go by the name of that brand, leading to increased trust. When you take the franchise on, you’re getting part of that reputation as a bonus. Since customers know the brand, banks know that at least some people will be guaranteed customers in your business.
It comes pre-organized
When you start your own business, you have to build it from the ground up. You decide the hierarchy and how every employee will have their work distributed. Everything from the payments to the organization and logistics is up to you and any partner you might have. While many entrepreneurs have started businesses, most of them haven’t worked out. Just organizing things is more of a chore than you might think. You can run into trouble before a single customer or client walks through your doors.
With franchises, the whole system is already in place. You're buying a business that is ready to be taken over and opened. While the building and location might need taking care of, the organization of the business is ready. You can save yourself substantial money, time, and energy by simply choosing a franchise over opening your own business. Step into the role of a leader and make good business decisions without having to prepare the groundwork.
The brand helps build the location
Speaking of getting things built from the ground up, you have to keep in mind that franchise owners don’t work alone. The original franchisor won’t just sit back and have you build the location without guidance. They will eagerly assist you in designing and organizing the space before the business officially opens.
They will even provide you with information about the best contractors for the job. As this is a potential investment for the franchisor, it's in their best interest that you successfully build your franchise branch and succeed in your endeavor. The contractors aren't likely to run into supply or excess material problems, as the franchisor will give you a detailed plan which includes everything you need for the franchise. It's quite the helping hand, which is something worth appreciating about the franchise-building process.
Negotiation is settled
If building and designing the physical location weren’t enough, the franchisor also assists you with establishing supply lines. Most business owners will spend countless hours negotiating prices and the logistics of transporting essential materials to their facility. This not only takes time, but it also takes quite a bit of effort to get the right suppliers for your independent business.
Since the franchisor already communicates with suppliers for their other franchise locations, there’s no reason they can’t organize your supply lines for you. This helps free up extra time for you to run the business itself. Instead of worrying about the reliability and price of suppliers, the franchisor provides you with the most affordable and appropriate supplier that they have. This is a very convenient part of running a franchise.
Help is always close
Running a business is pretty difficult, even when you’re running a franchise. Despite all the benefits that come with a franchise, you’re still going to run into the typical problems that people associate with business. However, unlike in independent businesses, you’re not alone here.
You're probably not the only person that will establish this particular franchise in your general area. Since franchises are a pretty good investment, others will also have entered into the market at some point. If they spent more time running their franchise, they’ve probably accumulated quite a bit more experience than you have at the very start of your run. This means they’ll have the knowledge that you need to overcome certain issues.
Since it’s unlikely that two branches of the same franchise will be located close enough to compete with one another, there’s no reason for the other franchise owner to ignore you. They are a lot more likely to want to help you in your time of need. After all, you’re both working to improve the reputation of your acquired brand, so it’s in your best interest to prop each other up. Contact and discuss franchising issues with other owners, and you might get just the information you need. It could even blossom into a business partnership or friendship even.
Conventions are open
Being open to new strategies is a key part of running a business. There’s always something new to learn in every industry. National conventions are great places to acquire new skills and get the training you need to adequately run your business. However, to get inside these kinds of conventions in your field, you need a reputation and connections that will get you an invite from others that already participate.
Franchises already come with these connections, as you’re constantly in contact with your franchisor. They will often organize conventions of their own, or participate in existing ones. You’re pretty much guaranteed an invitation to these conventions by the virtue of running a franchise. There you can talk to other corporate leaders and learn something new about your business and how to effectively manage it in different situations. The conventions are invaluable business tools that help you build a networking system that will come in handy later on.
You can stay up-to-date
When you’re at the head of a business, you are responsible for overseeing the company and its actions. When regulations and laws change, your business has to adapt to fit them. This adds to the long list of things you have to be mindful of when running your business. Sometimes, it’s difficult to keep track of all the changes that happen on a monthly basis.
Industry news is nothing new for the franchisor that has enlisted you. They stay well-informed on all the most important operational requirements that their franchise owners will need to know. It’s in their best interest to keep the business owner informed as well, as this directly influences their franchise. You will frequently receive crucial information from your franchisor on how to run the business and stay on top of new regulations. Any new licenses you have to acquire will be presented to you swiftly, to avoid any issues with regulatory agencies.
Calculating ROI is a breeze
It’s difficult to assess how much a business can earn without analyzing a mountain of variables. Even then, you only get a rough estimate of what the business could earn in theory, but there’s no telling how well it will do in practice. There are too many things outside of the business's control to accurately predict where the market will take it.
Calculating ROI is a key part of getting closer to understanding how a business investment will pay off. There are many calculations that have to be done that include how certain investments have fared in other companies and how effective they are in their current application. This is an enormous part of doing business in every industry.
ROI is a lot easier to determine in a well-established business, especially one with many branches that span different territories. You can account for all the different variables that might influence your business investments, and make a more accurate ROI calculation. First-time entrepreneurs have the benefit of analyzing other branches of the franchise and seeing how specific investments influenced them. This makes calculating ROI much easier, which allows for quicker and more effective business investments.
It’s a transparent investment
Before investing in a new business, entrepreneurs will want to know how profitable it is. This is a pretty difficult question to answer, especially if you’re aiming to run an independent business with no history. You can’t know exactly what you’re buying before you try it out. At least, you can’t know unless it’s a franchise.
Making an informed decision about a business is a lot easier when you have an extensive history to go from. When entering into a franchising business, there is a wealth of information at your disposal that can help you make the most accurate assessment of the business's worth. The franchisor will gladly provide you with all the information you need if you wish to buy a franchise branch.
Everything from the company’s history to its financial statements and franchise agreements is available for the franchisee. You can even get a glimpse of its litigation history and any disputes it might have been a part of. This kind of transparency helps the franchise owner understand what they’re getting into and how difficult or easy it might be to make a profit.
Owners get financial assistance
During difficult times, businesses often go under. When recession hits and cash flow is significantly reduced, handling liabilities becomes a nightmare. Since there’s no financial backing, insolvency will very often lead to bankruptcy.
The great thing about franchises is that the franchisor is interested in keeping the business afloat even during difficult times. They know that times of financial hardship will pass if the business model is profitable enough. This means that they will gladly prop-up their franchise owners during recessions and other market drops.
It’s not uncommon for franchisors to offer royal abatement for their franchisees. They will even wave franchise fees, as long as it helps the business operate. This can be a significant help for a business that’s aiming to grow during rough periods.
There is power in numbers
Businesses are often on their own while operating. The business knowledge the owner and their advisors have is everything, and there’s no outside help to offer something more. When something goes wrong, you have to go by what you know and not much else.
With franchises, there’s lots of cooperation between different branches. Hundreds of different offices work with synergy and try to help each other out by offering information, labor, and funding to their fellow business owners. This helps ease the burden of running a business, especially if things aren’t going well. Right from the start, you have an extensive web of knowledgeable experts that are ready to jump in and help if you need them.
There are many benefits that come with owning a franchise, which is part of the reason this is such a successful and widespread business model. If you’re looking to buy a franchise and start running things, you need to be well-informed on all the different ways you can seek help and improve the business. Consider the aforementioned examples and see if obtaining a franchise is something that would suit your needs.