If you’re thinking about starting a business, there are certain considerations that can help you choose the type of business to start. Many people consider whether to operate as a sole proprietorship or as a corporation when they first begin making plans for their business. It’s also worth taking into account whether the business is going to be a “home-based” or “brick and mortar” operation, as each type of business is organised differently from the outset. In addition, some entrepreneurs might also want to look at operating either as a franchise. This article explores the benefits of operating as a franchise for entrepreneurial endeavours, highlighting some of the factors that can influence whether a small business should consider going down this path.
Expertise and Know-how
Starting any kind of business requires that entrepreneurs develop skill sets in areas outside their expertise. A home-based or brick-and-mortar shop owner must be well versed in finance, marketing, inventory management, human resources, and many other requirements so they can keep their small business afloat on an ongoing basis. Franchising streamlines this process by allowing entrepreneurs to outsource the business expertise they don’t already have and gain new franchise information already provided. In other words, when you sign a franchise agreement, you gain access to specific knowledge and skills that can speed up your success in starting a new company.
Let’s say that you want to open a coffee shop in your town, but another franchisee has already established a successful chain of coffee shops in the region. When you sign up for their franchise agreement and begin operating as part of their chain, they have an incentive to help teach you everything you need to know about starting and running a successful coffee shop so they can have more customers frequenting one of their own stores.
Existing Customer Base
The main benefit to starting a business as a franchise is that the brand name already carries recognition among your target market. If you choose to start operating as a regular small business, you might find it difficult to attract customers because they will not trust the new company. Franchisees are able to use the recognised branding of their parent company to help them establish customer loyalty right from the beginning.
To illustrate, look at the logos of two different types of companies: Starbucks and Joe’s Coffee Shop. Even if they were both located in the same shopping mall, most people would likely buy coffee from Starbucks before trying Joe’s, due to their previous experiences with Starbucks. Thus, if you were to secure a Starbucks franchising agreement, you’d get their customers.
Less Financial Risk
In most cases, it is more difficult for a home-based or brick-and-mortar business to stay afloat initially because of a lack of start-up capital. This means that each month their businesses must bring in at least enough money to cover all expenses in order to continue operating successfully. Franchises have an advantage over regular small businesses in this area.
If your small business fails in the first few months after opening, you will experience bankruptcy at some point because you will have invested all of your personal funds into starting it. By contrast, if you sign a franchise agreement, the parent company will usually carry much or all of the financial risk for operating your particular business. They are more likely to be able to hire trained staff and keep their marketing spend high enough that your business can continue operating even if sales aren’t as high as expected in the first few months.
Another big benefit to starting a franchise is that you get to run your business in a way that fits your lifestyle rather than having to adapt your personal life around work requirements. This allows you to create a schedule for yourself where you can work part-time while still operating your small business successfully and earning an income from it. In comparison, most people find it difficult to run a home-based or brick-and-mortar business because they must be available on site every day in order to meet customers’ needs when needed.
Franchise owners do not have to come in every day but rather your opportunities for travel and leisure activities will be much greater than that of regular small business entrepreneurs who must stay home and wait for customers to buy their products and services.
Starting a small business is hard work and requires a great deal of knowledge and skill set development. If you’re considering making this type of transition, one factor to consider is whether starting as a franchise might ease those initial hurdles for you more than going down another route would. For entrepreneurs who want to avoid putting all of their personal funds at risk and still run a business, franchising provides a viable option. You can start by doing your own research or looking for opportunities right now.