Franchising: A Practical Introduction to Business Management

Many of us, including myself, aspire to become a business owner. To be clear, I believe there’s nothing wrong about being an employee until retirement. How you make a living is a personal choice, after all. A business owner isn’t superior to an employee, and vice versa. I simply like being my own boss andbeing in control of my work hours.

I daresay many of you feel the same. Without a sizable capital or a convincing business plan, however, it will be difficult to be approved fora loan or gain investors to get your business idea off the ground.But if you are enthusiastic, willing to work long and hard, and ready to learn how to run a business, buying a franchiseis a good alternative.

A Proven System and Existing Customer Base

Banks and startup investors look for certain qualities in aspiring business owners, like a relevant educational background and management experience. If you have neither, they may see you as a high-risk investment and decide against giving you the capital for your business. But, if you have a strong entrepreneurial spirit, a franchise can be a better fit.

The best thing about a franchise is that the business framework is already in place. Franchisees (people buying the right to sell a brand’s products and services using its business model)only have to study and follow it.Additionally, franchisors (franchise owners granting selling rights to franchisees) will guide and mentor you to help you succeed. Your sales, after all, willpad their bottom line.

Well-known franchises like McDonald’s, 7-Eleven, and Dunkin’ Donuts also enjoy a strong brand presence that guarantees people will walk through the doors even if franchisees do minimal marketing. Studies have shown that customers buy from brands they know and trust, and if your franchise enjoys that kind ofreputation in its target market, there’s a good chance your franchise will enjoy high sales.

Multiple Learning Opportunities

I’ve read countless articles about successful entrepreneurs and influential founders and CEOs. One thing I noticed that they have in common is that they learned how to run a business by going out there and do it. Experience is the best teacher, as some would say, and it applies to running a business.

Franchises offer great learning experiences because they expose you to the everyday nuances of business management. From stocking shelves andchecking inventory to serving as a Human Resource manager and Chief FinancialOfficer, you’ll be a doing a bit of everything every day. Even with a full-time store manager, it’s inevitable that you’llhave a hand in these areas of the business.

Lower Risk Compared to Startups

Franchisorsmonitor how franchisees run their respective branches, making sure the latter follow the company’s business and marketing plans. They do thisto preserve their brand integrity and maintain a high standard of quality across all franchised branches. As a result, franchises have a lower risk of failing compared to business startups.

It’s also worth noting that franchisors don’t grant franchises to everyone. They study if a franchise proposal is workable and make sure the prospective location has a captured market. Otherwise, they may reject an application. Franchisors observe these methods to increase each franchisee’s odds of success.

A Reality Check

As much as I support franchising, I don’t think they are 100% fail-proof. Like any business, a franchise may go underdue to mismanagement, and if sales fail to recoup the franchise fees and costs.

Also, some franchisors are better at giving incentives, providing skills and management training, and mentoring than others.Do your research first before buying and investing in a franchise.

Allow me to close this article with two tips:

  1. Find successful franchisees and talk to them. It’s likely that they have explored or tried other franchise brands. Ask for their honest opinion, especially about how their relationship is with their franchisors.
  2. Don’t settle for the first franchise that comes your way. Research and compare incentive schemes, franchise fees, closure rates, and income-related clauses in the franchise agreements. Consult a lawyer or a seasoned entrepreneur, if possible, so you can understand each agreement and choose the best option.

A franchise can be the best investment you’ll ever make. It can also be a huge disappointment. Either way, you’ll have learned first-hand what it’s like to run a business. If your first foray into franchising doesn’t end well, don’t give up. It might be the learning experience you need to be successful in your next venture.

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