The World of Franchising
A business owner's objective is simply to reduce losses and increase profits; this objective is one thing a business owner always bears in mind. However, in addition to profit and loss concerns, a business owner should also consider what makes them happy. This means that every business action is jeered towards a purpose—making profits by reducing losses and being content in your business venture.
Hence, this guide teaches you how to leverage franchising to enable you to reach your business objectives alongside finding fulfillment. If your desire is to own your own business, then franchising is for you. Let's show you how it is done.
An Overview of Franchising
Franchising is a term that describes a situation where a manufacturer grants license or rights to another party to help sell their products or services. The manufacturer that grants this license is called the franchisor, while the franchisee receives a license to sell.
An official agreement is drawn between the two parties on what each party benefits from the contract. The franchisor allows the second party to use their brand name, logo, and trademark, and in return, the franchisee will pay a one-time fee and consequently a certain percentage as the franchisee makes a profit.
The franchising industry solves many problems, and anything that solves problems stays; this is why the industry is lucrative and is also estimated to be worth much more even in 2022.
In 2019, the industry's economic output was $787.5 billion and had employed more than 8.4 million people directly, thereby providing employment opportunities and in turn, contributing immensely to the economic growth of the US.
The US Bureau of Labor Statistics also stated in an entrepreneurship report that the franchising industry is "generally accepted, because of their established, proven business practices, that franchises have higher success rates than independent business”.
Wondering how the future of franchising looks? It is bright, and one of the fastest-growing industries in the US, with about 753,770 franchise establishments.
Reasons Why Franchising is a Suitable Option
In a world where there are many players on the field, you need to leverage every opportunity you have to achieve the goals you have as a business owner. You may be wondering how franchising is a better option to business ownership compared to starting your own business from scratch; here are some reasons that show you how:
1. Lower risk of failure
A major concern several business owners have is how to ensure that there are more successes than failures. This is an advantage you have if you buy into a franchise.
Because franchising involves an agreement with a franchisor—which is a reputable company with already set standards - there is lower risk of failure.
Another reason why you should consider franchising as a path to business ownership is the affordability franchising provides.
In starting up a new business, rent, purchasing raw materials and training of staff are necessary aspects that you must spend on. But all these are covered with franchising, and you don’t have to spend so much by being a franchisee under a big company.
When starting up a new business, you need all the help that you can get in ensuring that you deliver the best goods and provide the best services to your clients. Therefore, you need training for your new business. And what is better than the best training offered at little or no cost?
Training is one thing that franchisors provide their team of franchisees, especially with complex or sensitive products: fast foods for example. Take Dominos as an example.
Because of the distinctiveness of the products and the different recipes required to make dominos what it is renowned for, every employee is required to undergo training, which ensures the brand's originality.
4. Sense of ownership
When establishing a business under a franchisor, you get the rights to sell their goods under their name, and sometimes, you can make decisions on other components of the brand.
The location of the workplace, the quantity of employees, and even their pay are some components you can have control over. With the franchisor's system, you get to be the boss in your own location. Some franchises will give you a higher degree of control than others.
5. High market penetration
The greatest advantage of buying a franchise is high market penetration. Market penetration deals with how well you get to sell your products to your customers, based on the popularity of your brand or the products. Franchising offers this advantage.
For example, KFC is a popular food brand whose products are in high demand. Because of the popularity of this brand, buying a franchise under them will make your business one with a very high penetration because the market knows the product you sell already.
One of the opportunities of franchising is scalability. Scalability describes being able to grow or expand a business. Scalability includes high demand for the goods or services supplied, recurring revenue and ability to teach others the art and act of the business—all of which development takes care of.
KFC as a food service brand is a scalable brand as its goods are in high demand and the processes can be taught to various franchisees making it easy to expand with various branches.
7. Brand recognition
Another reason to invest in a franchise is the recognition your brand gets from doing so. One of the problems that many start-up businesses encounter is getting their customers to know their brand as this takes a lot of time and resources. Franchising with an internationally recognized brand is a fix for this.
McDonald's is a perfect example of a brand that is recognized internationally and serves as a franchisor. Creating new franchises under McDonald's would mean that you get to use the brand name, trademark and everything about the brand, which the customers already recognize. All you have to do then is to sell to them.
8. Long term support
In addition to training new staff members, franchising also ensures that you have unparalleled and long-term support from the mother business; this is because the success of the franchisee is the success of the franchisor. Hence, every needed support is provided so you, as the baby business, do not lack anything.
Another way the mother business can offer support is by helping you find the right location for the new franchisee; since they have more experience on how the business works and what location is the best.
Buying into a franchise is one way to ensure job security. This is because the business is usually one with a well working system that has stood the test of time, knowing the best ways to navigate through an economic crisis.
This means that you can be assured that as long as the franchisor keeps figuring out ways to keep the business afloat, you have your job, no matter how the economy looks.
10. Faster expansion
Growth and expansion are important in every sector or industry. Investing in a franchise has the advantage of fast expansion over starting a business all on your own. This expansion is because the franchisor has already put in all the efforts needed for the business.
Take UPS as an example of a franchise with a rapid expansion rate. This can be attributable to the numerous franchisees operating under the mother brand.
Franchising is Right For You
As a business owner or one who is looking to start up a business, what you need to scale up your business is leverage. Many may advise that you attend seminars, take courses or wait till you are ready. As much as this advice is true, there is a much better and more profitable way to upscale your business—franchising.
Franchising is making an arrangement with a reputable brand to help them sell their products or services. You do this under the brand's name and with the brand's trademark. Because you are dealing with an experienced and known brand, you save time and money that you would have spent trying to build your own; this gives you an edge over starting a business from scratch.
You can benefit from all these elements that franchising provides. If you don't have an exact idea in mind, you can browse through hundreds of franchise opportunities and find a suitable match.
If you’d like more support, or have any questions, feel free to contact our team.
Explore these franchise possibilities and become the entrepreneur you've always wanted to be.