Do Business Well

Advantages

1. Proven blueprint. By purchasing a bona fide franchise, the franchisee quite literally buys a “blueprint to success”. He can follow this blueprint with confidence, not only initially but also on an ongoing basis. It is reasonable to expect that as a result, the amount of time it would ordinarily take to establish the business, reach breakeven and, hopefully, reach satisfactorily levels of profitability, will be considerably shorter than if he was an independent operator. Moreover, early losses arising from lack of experience and errors in judgement are practically eliminated.
2. Established trademark. Far from having to establish his credentials from scratch, a franchisee can expect to benefit from the goodwill associated with the use of the network’s trademark. In some instances, for example in many service industries, the franchisee will also gain access to the local branches of the network’s national customer base. An example would be cleaning services provided to the head office of a bank by the franchisor, while franchisees do the same for its local branches.

These factors combine to help the franchisee to get his business off the ground quickly.

• Possible cost savings. Although later in this discussion, “cost” will be mentioned as a negative in considering the purchase of a franchise, there are two sides to this and both bear careful investigation. In many industries, the mere fact that the franchisee latches on to the franchisor’s superior buying power provides cost benefits that would otherwise not be available to him. Indeed, cases are on record where savings arising from bulk buying are greater than the sum total of ongoing fees franchisees are expected to pay.
• Industry experience may not be necessary. In most franchise concepts, the underlying operations have been simplified to such an extent that previous industry experience is not an issue. Indeed, based on the premise that it is easier to teach a newcomer from scratch than to force an old hand to unlearn bad habits, many franchisors prefer to recruit franchisees from outside their industry.This offers a window of opportunity for those people who wish to make a career-change at a later stage in their lives and is one possible explanation for the fact that many prospective franchisees have reached their forties and fifties before they take the big step.

Mentoring and peer support. The franchisee support infrastructure put in place by the franchisor helps franchisees to overcome problems as they arise. In addition, by utilising the ongoing support services offered by the franchisor to the fullest possible extent, the franchisee has, in effect, an in-house business consultant at his disposal.

But there is more: as mentioned before, by joining a franchise the franchisee becomes a member of a family. This gives him open access to his peers, most of whom will have encountered the same problems previously, and are likely to have experienced similar emotions in the past. Because franchisees are usually not in competition with each other, they will be willing to give newcomers the benefit of their experience and discuss problems with them on an ongoing basis.

Disadvantages

There are some, but when compared with the impressive list of advantages, they pale almost into insignificance, yet everyone contemplating the purchase of a franchise should be aware of them. As long as the concept of franchising is properly understood, they will not be a problem.

Initial set-up costs may be somewhat higher. The franchisor will insist that a professional image be maintained throughout. This could necessitate higher spending, which may be offset by the franchisor’s preferential buying arrangements.

• Some franchisees consider the operational constraints imposed by the franchise agreement a disadvantage. They also resent the fact that the franchisor exercises ongoing operational control. What they overlook is that every network is only as strong as its weakest link, and it is in their own best interest to comply.
• Franchisees have to pay ongoing fees to the franchisor, yet in return they receive a multitude of services that help them to build their businesses.

Underfinanced, weak or unprofessional franchisors could have a negative impact on the development of a live-wire franchisee. Proper investigation of the opportunity prior to joining the network will eliminate this possibility.

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From the franchisee’s viewpoint

• Relationship Franchise Agreement - Operations Manual
• Some Franchise Terminology
• Is a franchise the optimal solution? From the prospective franchisee's viewpoint
• Is a franchise the optimal solution? From the prospective franchisor's viewpoint
• The Fact of Franchising
• Preparations for franchising
• Business format franchise
• Selling the Franchise
• What does a Franchise Agreement cover?
• Franchising Disadvantages Part 1

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