Franchising is the act of merging a smaller business (franchisee) with a more prominent company (franchiser) for an initial and recurring fee. If you are a small business looking to franchise, here is a complete guide on the differences between a franchise and a small business. This guide will focus on most elements and the “what-if’s.”
Benefits of joining a franchise
Here is a brief list of all the potential benefits that you will get from joining a franchise as a franchisee:
Guidance & Counselling
Franchising allows small businesses to enter the world of professionalism, and quickly find out all information related to doing business that the franchiser has figured out in their time. All franchisees will give the tools, and the counseling to use these tools that are necessary to grow as a business.
For a fee, franchising will also help improve the overall quality control of your business.
No experience needed
Business is a venture that needs to take if one is highly experienced in the field. Inexperienced businesspersons go out of business real soon. The best thing about becoming a franchisee is that you need no experience to become one as soon as you become a franchisee. The franchiser is responsible for teaching the smaller business, and for ensuring that maximum efficiency is achieved.
Exclusive training programs
Franchising allows businesses to get access to exclusive training programs for both the owner and the employees. These training programs help improve the performance of the business. For the owner, this is an excellent opportunity to train and become acquainted with other people in the field. For a businessperson, the best opportunities arrive from knowing people and having contacts.
Free branding
As a franchisee, you get access to the franchiser’s brand logo. This logo is what attracts customers. It is tried and tested that the brand is more important than the actual quality of the product. Making a brand for yourself is one of the hardest things for a business, whereas franchising allows any business to use an already-made brand’s name on their business.
Easy marketing
Although franchisers may ask franchisees for marketing fees, which use to fund their promotions and marketing, that franchisee will also include them in that marketing campaign. In other words, the franchisee will have easy marketing without devising a marketing tactic or campaign.
Improved customer influx
Because of branding, more customers will inevitably want to get into business with you. Marketing and branding are very compelling and force people to go out of their way to buy your products or use your services.
Better chance of survival
It is tough to survive as an independent business owner, which is where franchising comes in. By franchising, the chance of survival of a business increases dramatically. It is because of the many factors above, such as counseling, branding, marketing, and staff training.
Invest and sit back
For most businesses, franchising is more of an “invest and sit back” routine where they invest in a bigger franchiser, and then allow the franchiser to change and improve their business. If businesses are looking for a comfortable ride without having to go over the effort and risk of an independent business, franchising is an excellent option to make possible money.
An experience of a lifetime
Being a part of the more prominent corporate culture is an experience of a lifetime that will teach any business owner a lot. By exposing themselves to the bigger picture, business owners will find ways to employ after the expiry of their franchising business to improve their independent business and have a higher chance of surviving in the market without franchising again.
Benefits of staying as a small business
Here is a list of all the benefits that staying as a small business will provide you:
Freedom of choice
As a small business, you are free to choose whatever path. Small businesses can invest in anything and can try any marketing or business technique they want, and nothing can stop them so long as they are making a profit and not doing something against the law.
Freedom of business
As an independent small business, owners can change the very shape and intent of their business quickly. However, when they become a franchisee, the freedom to do that is removed as the franchisee becomes a more corporate-oriented gear in the bigger picture that needs only to perform a set of functions that the franchiser has set for them.
Leniency
Corporate culture is often unforgiving and has a strict set of rules that must follow. It is right for franchisees that enter a franchise too. However, when staying as an independent business, leniency allows businesses to operate as they wish without having to rely on strict rules that are often condescending and uncomfortable to deal with.
You are your boss
The previous benefits prove this point that you will be your boss in a small business. You will have your schedule; your own set of rules and you can easily choose whosoever to do business with. You will also have more control over every step you take in your business.
Make more profit
If you are looking to make more profit in the shorter and longer run, running a small business is the way to do it. It is because of pure mathematics. When franchised, all franchisees must regularly pay a portion of their profit to the franchiser, not to mention the yearly fees of amortization you had to do to pay your initial fees.
Lower risk of going under
Many franchisers suggest that smaller companies willing to franchise with them have a lesser chance of going under. It is not valid, because studies suggest that the chance of going out of business even as a franchise is still a whopping 30%. It is like the chance of going out of business with an independent business – if not more.
Can sell anytime
One of the best advantages of being an independent business owner is that you can sell the business any time you wish. Business is not something that is meant for everyone, even if they like it. The stress from business kills many on an annual basis and is not worth the headache for a dozen more. If your franchise, you will lose the freedom to quit whenever you want, with no strings attached.
Co-dependency is bad
History has shown us again and again that independence allows anything to mature and grow up. It is right for business too. Co-dependency results in not learning as much as a businessperson would learn independently. Furthermore, if the franchiser were to run out of business or quit, the franchisee would be at risk of losing jobs and, more importantly, losing the entire business itself. There are no laws that protect a franchisee from monetary losses when a franchiser decides to go out of business earlier than the contract’s expiry date.
Franchise vs. small business
Now that you know the several benefits of being a small business versus being a member of a franchise, here are some questions that you might want to ask yourself if you want to decide between the two of them:
Do I have the confidence?
Do you have the confidence to start a new business and venture into the unknown? The world of business is hard and can take a toll on your physical and mental health. You will most likely have to make a lot of sacrifices in the long term too, which can be quite a predicament.
If you feel like you have the confidence to take that plunge and feel like the business you are trying to open is worth the sleepless nights and the mental stress, go for an independent business. However, if you feel like that is too big a hurdle right now, and you might want to wait until you gain the confidence to do so, go for franchising.
Do I have the experience?
Some other factors that you might want to consider checking whether you have the confidence to start and maintain a business. A moment of weakness can lead to going under. You might also want to consider your staff’s experience and figure out if they are good enough for your business.
If you don’t have the confidence that you have enough experience, or if your employees are not trained enough, you are going for a franchise that might be a better idea. Franchisers provide adequate training and have several tested techniques that improve business strategy and allow for better control.
Final Thoughts:
It is crucial to ponder over whether you should make sure to have a choice to stay independent or rally up and join a more significant corporate. Take your time to decide because most franchising choices are a contract of around 10 to 15 years at a minimum.
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