Expert Answers to Biz Questions
Listen in! Pick up some expert advice to a reader's question that we selected from CyberSchmooz.
The Benefits of Opening a Franchise
Franchising is a great way to accomplish the All-American dream of being your own boss. There are franchises with higher startup costs, but there are opportunities at nearly any investment level. What’s missing is your commitment to the business. If you’ve ever thought “I can do it better”, franchising may be for you.
You could open a UPS store, or manage your own restaurant with hundreds of brands to choose from. Owning a franchise is a great way to manage your own business well into retirement, becoming financially independent and developing a financial safety net for your family in the process.
One of the big risks in business is the unknown: will your product sell and is there a demand for it in the market? You can spend a great deal analyzing the needs of the market, and ultimately still run on guesswork. Good guesswork can payoff like any gamble, but nothing is ever set in stone because innovation is the ultimate challenge and it comes whether we're ready or not.
Franchises offer a lower rate of failure selling a proven product. You are the owner and operator, often with only corporate above you to help your store sales grow. Most franchises market themselves as “turnkey”, meaning you can use a lot of their proven strategies to sell a product and work your own magic to improve revenues.
Essentially, you can think of a franchise a lot like a blueprint for your own business. Follow the plans, with your own personal touches along the way, and enjoy the independence of finally being in charge.
Strong Support Network
A franchise benefits a great deal from the network of owners and operators around the country that buy into the brand. Investing in a brand is more than just buying a piece of a nationally recognized name, you get real benefits. For example, franchisees often benefit from bulk pricing discounts based on the needs of the entire group.
You also get help finding the right equipment you need to do the job. You will get insight into the inner workings that make your business successful, and may have other networking opportunities as well. Conventions and yearly conferences will provide valuable data about nationwide trends you can deploy at the local level.
Built-In Customer Base
The biggest benefit to a franchise is brand recognition and the built-in customer base. A startup needs to do a lot of groundwork to get recognition, like appearing on television or landing a major news story. It’s hard getting that initial bit of promotion that leads to big sales.
Franchises, especially big names, don’t need to establish PR momentum. However, owners still need to market at the local level. Make sure customers are aware when stock changes, or when there are sales specific to your store. The brand may run national ad campaigns on television, but do not rely on these campaigns specifically to drive sales to your store.
Social media, and some engagement online, will help in letting your local customers know what they can find at your franchise.
Franchises do tend to have a firmly established roadmap they don’t want a lot of deviation from. You’ll find yourself listening to their advice, or being asked to leave the franchise (sometimes through heavy fines or other means or pressure). Be prepared to have some nitpicky differences with the brand.
You may have ongoing costs you didn’t plan on when you initially evaluate the franchise. The franchisor most likely expects a payment each month and may charge additional fees for use of advertising or equipment upgrades.
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