Franchising

Franchising certainly does have some strong arguments in its favour, and is definitely a viable option for many of those who aim to be self-employed. That said, it also has considerably disadvantages which must be considered before getting carried away and buying in to a franchise - before anything else is said in this article, I wish to stress the importance of research! Never buy in to a franchise without first researching previous and current franchisees', and always make sure to have a professional read through your legal obligations and rights!

Now that I've scared you a bit, let's look at the advantages that franchising holds over traditional entrepreneurialism and starting your very own, unique and perhaps even innovative, business. First of all, the franchise will (if it's worth investing in) be based on a tried and tested concept and comes with a manual - this saves a whole heck of a lot of time so far as developing systems, strategies and finding suppliers goes.

Second, the franchise will generally undertake the larger part of marketing efforts, saving time, money and expertise for the franchisee. Further, the franchise will often undertake market research (which is, of course, related not only to the marketing but also the placement of the new franchise, etc).

Nearly all franchises provide training prior to start-up as well as during the course of the franchises' development, meaning that the owner/managers of each franchise will be kept up to date on the latest developments in the relevant sector as well as receiving improved managerial and other skills. In smaller franchises, the owner may also act as a mentor for the franchisees and in larger instances a corporate manager may take on this roll.

Lastly, branded stationary and other consumables may be provided as a part of the franchise package, the franchisee will benefit from a strong (as compared to a single new start up venture, at the very least) brand name and finally, banks look more favourably upon franchises because of all of the above - making it easier to get access to venture capital.

Sounds pretty good, right? In fact, it can be. There are many people out there who have made a very comfortable living for themselves through opening franchised outlets of various descriptions, and many of these will be the owners of several different franchised shops, restaurants and other businesses. Some people simply love it, and do really well with it.

Unfortunately, though, there is a bit of a dark side to franchising as well. No surprise there, right? Is there ever such a thing as a perfect solution? The main disadvantages include:

• While the franchise will have proven track record and strong brand name to carry you along, this comes at a price! Some franchises require substantial investments.
• Though it is possible to sell on your franchise to someone else, the profit you can expect to make from doing so is generally considerably smaller than what you would make selling on a non-franchise business.
• Expansion is more difficult as you will need to apply for permission to do so from the franchisor, and will have to pay the same contributions for each franchise you open. You are also limited to the geographical area in which you trade, e.g. online or other long-distance sales will be undertaken by the franchisor at no gain for you (apart from benefits such as stronger brand name through increased exposure).
• It has happened many a time in the history of franchising that the franchisee and franchisor disagree and indeed fall out over various issues ranging from financial aspects, to marketing, management or too strict control applied by the franchisor.
• Innovation is limited as many franchises operate under a quite strict formula provided by the franchisor. While suggestions for improvement can be made by the franchisee, they are often not allowed to implement these without first obtaining permission from the franchisor.

So as with everything, franchising has its advantages and its disadvantages. For some people it is perfect, as it provides the opportunity to "work for yourself" in a sense, without the need to be an expert in marketing, operations systems, large-scale management, etc, etc. For others, however, it is far too limiting. It's up to you what you think, and if you reckon it would suit you then by all means - go for it! But as I mentioned right at the start, do your research! And I really can't stress the importance of that too much - I've read so many examples of people who have been run to the ground under the weight of their franchises, their expenses and the strict limitations.