The Benefits of Starting A Franchise
Launching a business is tough and not for the faint of heart. Not only must a retail entrepreneur come up with the idea, write the business plan, secure investors, source products, find a location, hire employees and spread the word through marketing, advertising, and social media, but there’s a chance that a single misstep could cause the entire business to fail. Starting a business usually involves some level of risk.
This isn’t to say that opening a franchise doesn’t come with its own risks, but one of the benefits of opening a franchise rather than a sole proprietorship is the higher chance of success. According to Franchising.com, here are some other benefits to opening a retail franchise:
Launching a franchise is much faster than opening a sole proprietorship business. According to All Business, new franchises take around two and 12 months to launch, depending on the type of business. Sole proprietorship businesses, however, can take anywhere from a couple of months to well over a year. An article in the Houston Chronicle advises that business owners should start planning no less than a year before their proposed launch date.
With franchises, a business model is already in place and franchisors likely have their own guides for franchisees to follow. If you’re looking to open a business quickly, a franchise could be the way to go.
Training and Support
The franchisee and the employees he/she hires can rely on tried-and-true training and ongoing support. Franchising is a team effort, so franchisors know that in order for their company and brand to maintain a solid reputation, it’s important to ensure that all of their franchise stores operate according to a certain standard. Most franchisors have field support representatives that help franchisees obtain training beyond operational, technical, and financial aspects to run the business. This might include how to hire and manage employees as well as how to build community relationships. Don’t be shy about asking for help from your franchisor. They’re there to not only help you fix rookie mistakes, but to avoid them all together. After all, your success is their success.
Scouting out a location for a business can be one of the trickiest parts of retail. You want an area that offers some healthy competition but isn’t over-saturated with similar businesses. You may need to take into consideration how much pedestrian traffic a neighbourhood attracts, and perhaps the biggest concern is what the rent costs are in a given area. Often, established franchises will provide assistance in finding an optimal site. After all, they’ve already done their research and have a proven track record of what areas work best for their business.
You launch a new retail business and know you offer a great product, but how does the public know? It takes years for entrepreneurs to build up a reputation and a solid customer base, but a franchise business already has one. Opening a franchise comes with the selling power of a known brand. So, when potential customers see your new franchise location, they already have an awareness of the brand and products and know exactly what to expect.
Group Purchasing Power
Another benefit that might not be as obvious to business owners is the lower costs associated with group purchasing. Franchises require all of their stores to sell the same or similar products, and the only way for them to guarantee that is to enable all of their franchisees to purchase from the same lot. Group purchasing power can drastically reduce warehouse costs because your company is able to buy 100,000 units rather than 100. For example, the average coffee shop owner might purchase coffee cups for around .40 per unit, while a coffee shop that’s part of a franchise may source the same coffee cup for as low as .10 per unit thanks to group purchasing power. Nearly all major franchises, including McDonalds, Dunkin’ Donuts, and Dickey’s Barbecue Pit, offer their franchisees group purchasing benefits.
Bigger Bang for Marketing/Advertising Dollars
Small retail businesses often gain customers through word of mouth, social media, perhaps with the help of bloggers and social influencers, and if they can afford it, advertisements in local newspapers and magazines. Getting the word out about your business can be costly, but being part of a franchise business means benefiting from regional and national advertising campaigns.
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On the local level, franchisors might help develop local marketing programsthrough a cooperative marketing fund, where franchisees can “buy in” using their own gross income. This might include sales and deals that are only available at stores within an area, or special events that take place at specific locations. While national advertising increases brand awareness, local marketing drives customers directly to your business.
Perhaps the biggest benefit to opening a franchise is having a network of fellow franchisees that can provide advice and moral support. Because you’re all operating under the same brand, the success of one franchisee helps benefit the rest of its peers. You’ll know each other through the company network, maybe see each other at annual conference, and won’t feel as much like you’re doing it alone.
For franchisors, the list of benefits may not be as long, but franchising your business does come with some rewards. For one, franchising makes expanding your business and brand much faster than doing it alone. You’re using other people’s money, time, and effort to expand more rapidly, growing brand recognition, revenue, and the number of products you can sell. Also, startup fees and ongoing royalties help fund headquarter costs, the hiring and training of new employees, and large-scale advertising campaigns.