If you’re thinking about buying a franchise, you may be weighing that option against traditional entrepreneurship. After all, being a solo entrepreneur gives you more control over, well, everything. And you can put all your money straight into the business, rather than paying some of it to a franchisor.
However, I obviously think franchising is the better choice, or I wouldn’t own six franchises myself–and I wouldn’t have decided to become a consultant who helps others start franchises of their own. So why did I make that choice? Because I saw that buying a franchise meant much more than just purchasing the right to open a business under a particular name. Franchising encompasses an entire ecosystem of value that, I believe, makes my investment go farther and increases my odds of success.
When you a buy a franchise, you get three key operational benefits that make franchising superior to traditional entrepreneurship. You get (1) a ready-made business system, (2) an established brand, and (3) the support and leverage of the franchise network. Let’s break down the advantages of each one of these benefits.
The Business System
Many traditional businesses fail because the entrepreneurs who founded them can’t figure out how to provide a quality product or service at a sustainable margin. It’s a complicated equation that involves numerous factors. Entrepreneurs have to determine where to find the best inventory, equipment, or manufacturer; what product features or service options are most appealing to customers and at what price; and how to market and sell their offerings effectively.
A franchisor has already solved this complicated equation. They’ve figured out product-market fit, pricing, the most effective marketing method, and more. In many cases, they’ve also developed proprietary tools, such as scheduling software, that will help you operate your business more efficiently. They’ve also had time to fine-tune the business model in collaboration with all the franchisees who’ve come before you. That means they’ve dealt with plenty of unusual situations, crises, and contingencies and already developed solutions for them.
In other words, buying a franchise means buying a complete business system. You just take it out of the box, so to speak, and go. You don’t have to waste money on false starts or failed experiments, or spend a lot of time solving the many puzzles that arise when establishing a brand-new business. It’s all been done for you. For me, this is the most compelling part of the franchise value proposition and the primary reason to choose franchising over traditional entrepreneurship.
The Brand
Though buying a franchise isn’t just about buying the right to hang a particular sign above your door, that is an important part of the value proposition. More accurately, it’s about buying the right to use an established brand, instead of having to create a compelling brand from nothing. Why does this matter?
Take it from someone who worked as a marketing executive for more than 20 years: creating awareness of a new brand is one of the most costly and time-consuming parts of getting a business off the ground. Franchisors have already done this work. With minimal effort on your part, your business will benefit from the fact that many customers have already had positive experiences with the company, or are at least aware it exists.
Also keep in mind that a brand isn’t really a name or a logo. A brand is the experience people have with a business. Did the product or service meet their needs? Was it worth the price they paid? Did the experience feel welcoming? Did employees seem competent and professional? A good franchisor, in collaboration with early franchisees, has already figured out how to create an experience that brings customers back again and again. If you follow their system, you can reap the benefits of brand affinity without having to do the hard work of developing it.
The Network
Finally, buying a franchise means buying the support and leverage that come with the company’s network. You’ll receive support not just from the corporate office but also from your fellow franchisees. Especially in the early days of running your business, this support will be incredibly valuable. Franchise owners often assist each other through site visits, networking meetings, phone calls, or shared resources. They’re a great source of operating tips, creative solutions to problems, or just a listening ear.
This network of owners provides another benefit: leverage. A traditional entrepreneur is on their own to negotiate with suppliers, but franchise owners can tap into the bargaining power of an entire network. Often, franchisors will negotiate special pricing (say, for equipment, inventory, or supplies) on behalf of their franchisees. Many also have established relationships with lenders, construction companies, and other service providers to give franchisees special discounts or priority service.
What If You’re One of the First Franchisees?
Even if you’re one of the first franchisees in a network, buying a franchise can still be a smart choice. The franchisor may not be as well known, or may not have worked out all the kinks in their system, but they will still have laid a lot of groundwork for you.
Just make sure you take extra steps to safeguard your investment. Research the company even more carefully than you would an established franchisor. Pay especially close attention to the financial information and the owners’ backgrounds. Do all the numbers add up, and do the owners have a proven track record of success in previous roles? If they’re not willing to provide you with a full business plan and detailed information, walk away. They should also be willing to make some kind of concession to early adopters: for instance, lower fees or startup costs, first pick of new locations, or a special role helping to fine-tune the business system.
Still not sure whether traditional entrepreneurship or franchising is better for your situation? My co-consultant Lauri and I can provide customized guidance to help you work through all the options–and our services are always free. Schedule a call with one of us today to get started on your path to success and freedom!
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