Why start a franchise business?
India is the second-largest franchise market in the world after the United States of America (USA) with about 4,600 operating franchisors and 0.15 – 0.17 million franchisee outlets by 2019. Franchises are one of the fastest growing new business opportunities in India.
You are tired of working for someone else, and you want to start your own business, but don’t know if you should do it from scratch.
Starting a new business is one of the most challenging decisions you can ever make. First, you need to find a good idea and then build a marketing plan, branding, sales, hiring, etc. Then, you need to work on the product strategy and, finally, raise capital to execute your plans.
Sounds like a lot of work.. right? This is where Franchise Business can help you.
Things to keep in mind before starting a business
It’s essential to research your industry, find competitors, understand risk, and map out your finances before starting your business. Starting a business can be stressful. It often feels like there are 1,000 things to work on all at the same time. There’s no avoiding this reality for new small business owners, but with a little planning, you can grow it all. Beyond giving it your all, it’s essential to direct your energy to the right tasks, especially at first. Experts say some good first steps in starting a business are researching competitors, assessing your industry’s legal aspects, considering your personal and business finances, getting realistic about the risk involved, understanding timing, and hiring help. You want to make sure you understand the industry you’ll be involved in so you can dominate. No matter how unique you might think your business idea is, you should be aware of competitors, said Ian Wright, founder of British Business Energy.
Standing out is no easy feat, and no one magic formula guarantees results. However, knowing your business’s purpose is central to guiding these decisions. “Entrepreneurs should know their industry’s risks before purchasing business insurance,” said Jeff Somers, president of Insureon.
What do we mean when we say, Franchise Business?
Franchising is a form of marketing and distribution. The owner of a business system (the franchisor) grants to an individual or group of individuals (the franchisee) the right to run a business selling a product or providing a service using the franchisor’s business system.
Franchisees are also permitted to use the franchisor’s branding, trademarks, and identifying marks under specified guidelines. It is vital for anyone deciding to start a business by becoming a franchisee to remember that the franchisee is bound to a partnership agreement with the franchisor for a defined period (some exceptions do exist). A franchise is a method of distributing products or services involving a franchisor, which establishes the brand’s trademark or trade name and a business system. A franchisee pays a royalty and often an initial fee for the right to do business under the franchisor’s name and system. Technically, the contract binding the two parties is the “franchise,” but that term more commonly refers to the actual business that the franchisee operates.
Own business Vs. Franchise Business
Pros and Cons of a Startup
- Innovation and Creativity: Founding a startup needs innovation and creativity. If you are a highly creative person full of different ideas and you want to make these ideas a reality, then, you should definitely start it up.
- Professional Freedom and Growth: When you have your own business, you can work anytime you want. Also, depending on your business, you can work anywhere you want. You don’t need to report to other people. This means you have your professional freedom. Moreover, franchise businesses can grow only up to a certain point, but there is no limit to a startup business’s growth.
- Higher Failure Rate: Unfortunately, startups have a higher failure rate compared to franchise businesses. Statistics show that 25 percent of startup businesses fail within their first year, 50 percent of the remaining fail within five years, and approximately 30 percent of the remaining last ten years. Therefore, it is precarious to launch a startup but don’t forget that high risk equals high return. If you succeed, you can even be a billionaire!
Pros and Cons of a Franchise
- Higher Success Rate: A franchise is a proven system. All franchisees operate under a standard procedure, and they are only responsible for their day to day operations. Also, they get trained about the product line, marketing, how to deal with staff and other aspects of their daily activities. Basically, they get ongoing support for their businesses, which brings them success.
- Brand Recognition: Franchises bring brand awareness with their names from day one. Therefore, customers will know about your products, which will increase your sales. By buying a franchise, you are buying a turnkey business that is ready and waiting for you to start.
- Fees: There is a fee for buying the franchise and ongoing fees that you need to pay to a franchiser. The entrance fees can seem a higher price, but it fixes in the long run, and there are fixed costs every month/year for using the brand name.
- Less Freedom: You don’t have the freedom to change the product line, the store’s decoration, or anything else in a franchise system. It is very restrictive, and you need to follow certain rules to protect your franchise license.
You must be wondering what else does a franchise offer, so here is a little sneak peek to dive in,
- CAPITAL: The franchisor’s capital requirements will be lower because the franchisees provide the capital to open each franchised outlet.
- MOTIVATED AND EFFECTIVE MANAGEMENT: The local management of each franchised unit will be highly motivated and very useful. They treat the franchise units as their own, which will usually lead to higher sales and profit levels.
- FEWER EMPLOYEES: The number of employees a franchisor needs to operate a franchise network is much smaller than they would need to run a network of company-owned units.
- SPEED OF GROWTH: The franchise network can grow as fast as the franchisor can develop its infrastructure to recruit, train, and support its franchisees.
- REDUCED INVOLVEMENT IN DAY-TO-DAY OPERATIONS: The franchisor will not be involved in each franchised outlet’s day-to-day operations.
- LIMITED RISKS AND LIABILITY: The franchisor will not risk its capital and will not have to sign lease agreements, employment agreements, etc.
- INCREASING BRAND EQUITY: Leveraging off the assets of franchisees helps franchisors grow their market share and brand equity more quickly and effectively.
- ADVERTISING AND PROMOTION: Franchisor will reach the target customer more effectively through co-operative advertising and promotion initiatives.
- CUSTOMER LOYALTY: Franchisors use the power of franchising as a system to build customer loyalty- to attract more customers and to keep them.
- INTERNATIONAL EXPANSION: International expansion is more comfortable and faster since the franchisee possesses local market knowledge.
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