Have you been thinking about franchising? The best way to ensure success when you buy a franchise is to understand why to choose this form of business.
From the advantages to the differences between franchising and licensing, this article will go through why you should choose a franchise business.
What Is a Franchise Business?
First things first, what does a franchise business mean? Franchising refers to the process where one company (or business owner) sells the license of their brand to others (who will be franchisees). This means that franchise businesses can sell products under the same brand.
Pros and Cons of a Franchise Business
There are some benefits and drawbacks of owning a franchise business. These are the most common ones.
Pro: Existing Brand Recognition
One of the greatest things about buying a franchise is that you are not starting from scratch. With a pre-existing brand, you may have existing loyal customers who recognize you. This can mean that you don’t have to spend as much marketing your brand, and you can start raking in profits very early on.
Pro: You Can Access Support From the Franchisor
Often, the franchisor of the brand won’t leave you in the dust after you buy the franchise. This is because they have a vested interest in seeing you succeed, as you will both be operating under the same brand.
This means that you can access their support and be able to understand how to grow the franchise business. They may offer assistance in areas such as finances, training, design, and more. Another benefit from this is that you don’t have to invest in the business with all of your own resources.
Pro: You Don’t Need to Have Experience
Another great element of having a franchise business is that you won’t need a lot of experience in order to succeed. When you want to run your own business, you will likely need to have expertise in the field so that you know how to operate the business.
With a franchise business, however, you are building on a pre-existing company with a brand and a vision. Franchisors may also provide you with the necessary training to run the business.
Pro: You Are Less Likely to Fail
When you run a business, one of the greatest fears is that the business will not pan out. This is less of a concern when you have a franchise! With the existing level of infrastructure, brand success, and franchisor support, you will have a safety net that prevents you from failing.
This is something that you won’t get to enjoy when you start a business from scratch. A franchisor will also provide support regarding tried-and-true operational and marketing methods, so the risk of failure is low!
Con: There May Be More Restrictions
Before jumping into owning your own franchise business, there are some things you will need to consider. First of all, there may be more restrictions to what you can do as a business owner.
When you start your own company from scratch, you get to be in charge of everything. Your brand is completely your own, and you will have more control over the way your business will run.
On the other hand, a franchise business will already have a system in place and some expectations on what you can do. There will also be less creativity involved in building up a brand and a marketing strategy.
Con: Your Reputation May Be Affected by Other Franchise Businesses
What happens if you are doing well but one of the other franchises is not? Since you will all operate under the same name, this can negatively impact your reputation.
This can mean that you are not entirely independent in running a franchise business and that there are things beyond your control that may impact the success of your operations.
What Is the Difference Between Franchising and Licensing?
Franchising and licensing may seem like very similar business models, but there are differences in how they are applied in practice.
Franchising involves using an existing business’s trademark and overall system operations. When you buy a franchise, you get to operate under the same name. Licensing, however, only involves an agreement between the licensor and licensee to produce the same products (for which the licensor will receive royalties).
Due to the above difference, licensing involves less of an ongoing relationship than a franchise business does.
Another difference is that a franchisor can retain a lot of control over franchises, which is something that does not happen in licensing. A franchisor can still make it a requirement to utilize specific franchise marketing or operational methods. A licensor, however, is not involved in the licensee’s business operations, of course if you’re running a business you’ll need a network in your company with different devices like computers and phones, iot connectivity allows for multiple compatible devices to connect in your ecosystem so you can manage everything in a more simple way.
This means that you will not receive as much support or advice out of a licensing agreement as you would when you buy a franchise business. This is something important to consider, as it may determine the success of your business in the long run.
Why You Should Choose a Franchise Business
Overall, there are plenty of benefits to running a franchise business. You get to start with existing brand recognition, work with the support of a franchisor, and you don’t even need that much experience!
One of the key takeaways that differentiate a franchise from similar models (such as licensing) is that the risk of failure is lower and that you get to access the existing operational strategies of the franchise.
Contact us to schedule a business consultation.