An interesting question was posed today at Yahoo Answers. Given the failure rate of new businesses, can going through the franchise route improve your chances for success?
I answered the question by exploring the advantages of franchises:
1 – Franchises are already established businesses. Franchises have already proven that the business concepts work and that their business ideas are valid, hence the franchisors are replicating the business through franchising. They already know that there is a demand for their products
Sole proprietors, on the other hand, have to determine their business idea is viable, and whether there is a demand for their products or services.
2. A franchisee cannot be approved without proving that they have the resources and capital needed to run the franchise effectively. They have the resources in place.
Sole traders often operate on the fly and on the shoestring, trying to make do with what they have. Unfortunately, lack of resources mean lack of opportunity to do many things needed to run the business well. Hence they fail.
3. Franchises have the benefit of branding. They come in with a “good name” that is familiar, if not well known to the consumers. Think of a Subway franchise — consumers already know Subway is, what are their products, and often already have an opinion of the products. Compare that to Nenita’s Subs and Fries, which no one knows about
4. Franchises have the support of a knowledgeable management team who already knows what works, what does not work, and how to run the business. Hence, they offer training, even helping franchisees find the best location for the business. They have already studied what works in terms of the store decor and layout.
Franchisees are coming out of the gate with all these information, data and knowledge that a sole proprietor has to learn through trial and error
5. Supply chain for franchises is already set — the franchisee don’t have to spend time looking for the best suppliers for the business in terms of both quality and price because the franchise owner already did that for them.
Compare that with the sole proprietor who may need to spend the better part of their initial startup period looking for suppliers, manufacturers, etc.