Four Reasons Why Franchising is a Great Alternative to Starting Your Own Business From Scratch

The independence of starting your own business is a dream for many, but it’s easy to forget the challenges and the financial demands and risks that come with the territory. Franchising comes with many different advantages, and is a great way to minimise risk but retain freedom and flexibility in your role. Here are four reasons why franchising is a great alternative to starting a business from scratch.

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Running a franchise does, of course, come with its own set of challenges. But it also comes with plenty of rewards, like the benefit of franchisor experience via initial training and ongoing training and support. In this article, you’ll find a detailed exploration of the four main advantages of franchising.

What is franchising?

We’ll start by defining franchising, because industry understanding will be imperative before you make any investment leaps. Franchising refers to the right or licence to trade, granted by a franchisor (company owner) to franchisees (company investors). The word ‘franchise’ refers to the entire business, or to the specific franchise unit that a franchisee is running.

When entering into a franchising relationship, the franchisor and franchisee will sign a franchise agreement, setting out the legal rules and regulations of the partnership. Franchisees will usually be required to make an initial financial investment, often along with ongoing monthly fees such as a royalty fee.

How to start a franchise business

Last year, 1,000 UK adults in employment were asked whether they’d like to start their own businesses, and a huge 65% said they would [Micro Biz Mag]. So, why haven’t they? More often than not, people are put off from starting their own businesses because they’re afraid to fail. And with 20% of new businesses failing in year one, and around 60% going under within three years, you can see why it’s a scary prospect. [Fundsquire].

Luckily, franchisee failure rates are far lower, with 93% of franchises claiming profitability in 2018 [British Franchise Association]. But how exactly do you go about starting up a franchise? You need to:

• Do your research ahead of time

• Book a discovery day to find out more about the specific franchises you might be interested in investing in

• Consider the location you’d like for your franchise, and narrow down your list of potential investments based on this

• Look into funding options if you don’t have all the money you need ready

• When you reach the point of having received a franchise agreement from your potential new franchisor, be sure to read over it carefully, and seek legal help confirming that everything is in order

The four key advantages of franchising

1. The provision of quality support and training

Many franchisees don’t need any prior experience in the sector. Knowledge gaps are comprehensively covered during the initial and ongoing training programme, which will be provided to the franchisee. The support and training options available will differ from franchise to franchise, and many of these provisions will be laid out in your franchise agreement.

The vast majority of franchisees have contact with their franchisor’s support staff at least monthly (90%), with a third having contact most days. Franchisees are largely happy with the support provided, with 48% rating it as excellent, and a further 31% rating it as good. Just 5% rate the support received from the franchisor as poor. —British Franchise Association

2. The chance to work with an established, successful business

Connecting with an established franchise substantially minimises the associated risks of starting your own business. As a franchisee, you’ll be able to follow an existing, proven business model, and if you do, you’re likely to reach profitability within two or three years. Further advantages to working with an established business include:

• Access to an existing customer base - You won’t need to build an audience for your products/services from scratch.

• A good reputation - In the industry, you’ll already be known by your brand, and you’ll win some immediate trust with customers, vendors and other businesses as a result.

• Speedier growth - Your speed of growth will be far quicker than it might have been if you were starting your own business from scratch, as you’ll have access to the business model, the resources you need, and to expert advice when something goes wrong.

The fees associated with buying a franchise are often worth the fact that you should start making money fairly quickly, depending on your branch’s location. —Real Business

3. The increased likelihood of success and profit

Franchising has a high success rate compared to the success rate of those who start their own businesses. This is due to the increased support you’ll have access to, the working business model you’ll be able to utilise, and the brand name you’ll be able to operate under. Entering into a franchise agreement, you’ll be armed with the knowledge that your new arrangement is highly likely to be successful, and this should reduce the stress that is common for new business owners, especially during the first year.

That said, do be aware and conscious of the fact that overconfidence won’t benefit your franchise. Success is never a guarantee, even with all the right tools. Put in the hard work, follow the business model and the franchise agreement, and be sure to accept all the support and training that you’re offered so that you can continue to be the best possible franchisee.

4. The reduced financial burden

Though franchising isn’t always cheap, and some initial investment costs will be incredibly high, it is still often far cheaper than starting your own business and building everything from the ground up. Also, because franchising is such a huge industry with such a good reputation, there are plenty of financing options available to potential franchisees who don’t have all the money they need upfront.

As a franchisee, you are looked upon more favourably when it comes to bank loans and overdrafts than if you were a struggling entrepreneur trying to kick-start your own firm from scratch. The increased security and reliability of a large firm behind you means that banks will often offer you substantial loans to aid your start-up costs. —Startups

Start your own business with the support of an expert franchisor

Be your own boss, call your own shots, but benefit from expert support. That’s the franchising business model. If you’re interested in all that being a franchisee with a reputable company could offer you, explore available investment options via Point Franchise’s UK franchise directory.