Owning a Franchise 101
For many Americans, owning a business is a lifelong dream that begins with an idea and an investment and ends in either triumph or bankruptcy. Starting a new business is a risky endeavor, although not quite as risky as one might think. While it’s a common belief that 50% of new businesses fail in the first year, the real metrics are a little less daunting. About half of new businesses survive five years or more, and around a third of businesses survive 10 years or more. Still, for many people starting a new business just isn’t feasible. But there is another option- opening a franchise.
How is a Franchise Different than a Startup?
By definition, a franchise is a method for expanding a business and distributing goods and services through a licensing relationship. In simple terms, a person purchases a license to use the name of an existing business that they will manage, but will operate under the same system as the existing business. This means that they commit to being trained about the product line, engage in consistent marketing, and use the same system for hiring and managing employees.
What are the Benefits to Owning a Franchise?
Franchises experience a much higher success rate than start-up businesses because they use a proven system and receive ongoing support from the original business. They also benefit from the brand recognition, the service reputation, and the product or service the franchise offers. Startup businesses, on the other hand, have to build up their reputation from day one and have an incredibly small margin for error with their customers.
What are the Drawbacks to Owning a Franchise
What draws many people to the idea of business ownership is creativity and freedom. The idea of bringing their idea to life is part of the appeal, and with a franchise, there is no option for changes. When you purchase a franchise, everything is predetermined, from the business model to the decoration of the business. A business owner can try new things and experiment with different product and service options. A franchise owner has to go with whatever the brand as a whole decides.
How Do You Succeed as a Franchise Owner?
Deciding which franchise will work best in your area and for your lifestyle is the first step. This depends heavily on your location, and you can check out which franchise is popular in your state here. Additionally, there will be substantial fees both upfront and annually or monthly for using the brand name, and you will need to be prepared to invest a large amount of money in this endeavor.
The best franchise owners have management experience and skills. Depending on which franchise you decide to invest in, you will need to tailor your approach for optimal success.
Finally, there will be legal and regulatory requirements set by the business you choose for your franchise. You might need to meet special licensing or educational requirements, or you could need to lease a space and get permits for a buildout. Research your franchise carefully and make sure that you are capable and willing to meet these requirements.
Owning a business or a franchise is an exciting opportunity, but depending on your lifestyle, you might decide that one option or the other is better for you. Do your homework, put in the time, and with a little luck, you’ll have great success.