Becoming a member of the franchise family
Franchising is all about building relationships, in this article Nick Williams explains the power of becoming a member of the franchise family.
I recently bumped into my cousins and their younger daughters, who have grown enormously since I saw then last which is probably 4 years ago. We immediately fell into deep conversation, catching up, and ended up spending the rest of the day and the evening together. It was a lovely afternoon.
What does that have to do with franchising, you are wondering, I’m sure? Well, it set me thinking about the power of relationships and the strength of an extended family.
There is clear evidence, backed by long term studies undertaken jointly by NatWest with Warwick university that 40% of new businesses fail in 2 years. There is further evidence from the NatWest franchise survey that 90% of franchisees will still be trading 5 years after they begin in business.
Nevertheless, it should be clear that people ought not to choose a franchisee based on the belief that success is guaranteed. That is not true – franchisees have to play their part in following their training, the system, and then applying themselves to their work with determination and resilience and also with an ability to connect with and relate to new customers. That is equally true of anybody starting a business!
So, let’s just think about why it is advantageous to own a franchise and the strength that it can bring:
- Low failure rate. As already discussed.
- Business support. Franchisees will benefit from valuable assistance throughout the life of their business. When they buy a franchise, they will receive all of the input, training, equipment and supplies that they will need together with ongoing training and help with management and marketing. The franchisee will reap the benefit of the parent companies national marketing campaigns as well as collateral to use for their local initiatives.
- Buying power. The franchisee will benefit from the collective buying power of the parent company which passes on the preferential terms that it negotiates to franchisees so that stock, supplies and equipment are normally less for the franchisee than for a small startup business with no negotiating power.
- Brand recognition. Many well-known franchises have national brand name recognition. Owning a franchise is similar to buying a business with built in loyal customers. Where the franchise is not yet known because it is building its reputation then the franchisee gains, instead, the benefit of the attention and commitment of the franchisor to them as foundational franchisees.
- Strength in numbers. I revert to my thoughts about family on this particular topic. Franchisees pull together and support one another. They pool best ideas and best practice. Being part of a family gives you that security. During the dark days of Covid, franchisors stepped up to the plate and invested heavily of themselves in helping their franchisees through troubled times. There is very little support available to an independent entrepreneur, in fact, many people who start a business themselves comment on how lonely it is being the person who has to make all the decisions and, if they have not been in business before, having to think through every aspect but without deep experience and knowhow on which to draw.
- Proven capability. The whole point of franchising is that the franchisor has already made the mistakes, worked out what the business can do well, and what does not work. That knowhow is passed on to the franchisee so that their risk is reduced.
- Easier access to finance. Banks are more likely to finance the purchase of a franchise than the launch of a new business. An established franchisor will help its franchisees secure finance and have very close relationships with chosen banks.
- Customer confidence. Customers trust that the individual locations of a franchise network will offer reliability, good value and service.
- Easier staff recruiting. Finding good employees is a critical success factor for many independent small business owners. A franchised business will recognise names and have created recruiting power than an unknown business entity.
- R&D. Ongoing research by the franchisor provides franchisees with new business opportunities, adding value to the business.
- Professional and personal development. Franchisors typically offer their franchisees comprehensive training in sales and other business skills. Franchise also gain education, recognition and social opportunities via meetings and communication with fellow franchise owners.
People have always wanted to be in business by themselves, and will always want to do so – but more than ever before, in these uncertain times, there is real value in becoming a member of the franchise family!
In summary, as you explore the opportunities of franchising, do so with eyes wide open, but with a sense that good quality franchises have survived many periods of economic turbulence and will continue to do so. Good hunting!!
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