There’s no doubt that the business world is changing – advances in technology mean that almost anybody can start their own business with little more than a great idea and a laptop.
As great as the internet is, however, our love affair with bricks and mortar shops and establishments remains strong; something which has been highlighted as we flock back to our favourite shops and restaurants now that restrictions have been lifted. There are a few options available when it comes to high street businesses – one of which is franchising. There are those who feel that, in 2021, it’s a less relevant business model than in the past; however, they are wrong!
In this article, we’re going to be looking at some excellent reasons why the franchise business model is still very much alive and kicking:
Dialling down the financial risk
After a long pandemic, the idea of investing in a business is, of course, a concern as our economy battles to bounce back. Unlike starting your own business from scratch, investing in a franchise offers a reduced level of financial risk for the franchisee who is buying into a tried and tested business model. For anybody claiming that franchising is a dying breed of business model, the £15 billion contributed to the UK economy by the franchise industry tells a very different story.
Dialling up the yes factor
As well as reducing financial risk, a franchise system will increase your chances of gaining funding, should you need it. As a rule of thumb, your bank manager is more likely to welcome you with open arms if you’re asking for a loan for an established business than if you’re starting an independent business that carries a higher level of risk.
In the market for success
When starting a new business from the ground up, you automatically have a lot of groundwork to cover – not least in conducting comprehensive market testing. Market testing is vital for any product or service and can often take up a lot of time and a sizeable chunk of your budget.
If, however, you decide to buy a franchise, you’re grabbing a slice of a business that has already successfully conducted its testing and has developed a large market for its products.
Warding off recession
While no business can be said to be completely recession-proof, investing in an established franchise is an excellent way of hedging your bets.
During a recession, new and small businesses are often hit the hardest. They tend not to have much of a safety net in terms of emergency funds. The UK’s 44,000 franchise owners, however, are more likely to ride the storm of a recession than others due to a couple of factors:
A household name – In many cases, franchised businesses provide products and services that are well known and a part of their customers’ lifestyles – for example, McDonald’s. These types of businesses are rarely affected by a recession. While people may tighten their belts in terms of holidays and luxury goods, they’re unlikely to give up their daily coffee or breakfast.
Bigger pockets – Franchisees enjoy the support of a large company, including financial support. This can prove to be a vital lifeline for franchisees during times of economic strife.
Grabbing an exclusive
Competition is an unwelcome but often inevitable part of running a business.
As an independent business owner, this is a constant concern. Your coffee shop might be great, but there’s absolutely nothing stopping somebody from opening a similar business next door.
With franchising, business owners benefit from a degree of exclusivity as the franchisor will usually agree not to sell another franchise within your territory. While this won’t prevent somebody from opening a similar kind of business in your locality, the advantage of running a well-known brand exclusively within your area is a compelling one.
In this respect, you’ll usually receive support from the franchisor when it comes to choosing your location and researching your audience – something which you would be responsible for doing yourself if you were going it alone.
Getting ahead of the big boys
Speaking of competing, owning a branch of a big-name franchise allows you to do just that.
Even though your branch may be considered a ‘small business’, having the clout of a big name – and all that goes with it – behind you will often enable you to compete with much larger companies in your local area; something which is rarely possible for small, independent businesses.
Supply on demand
Before you’re able to start ‘stacking the shelves’ of your independent business, you’ll find yourself stuck in the time-sucking black hole of finding suppliers for your products or materials.
Finding the right supplier can be incredibly frustrating and time-consuming. The great news for the franchisee is that all of this is done for you. Buying into a franchise means automatically tapping into a pool of trusted suppliers – and the franchisor does all the hard work for you in terms of re-examining product costs and supplier renewals. For a busy business owner, the time and money-savings in this department can be considerable.
The world is your oyster
Tapping into a franchise can give you automatic access to an international brand – something which would take a lot of time and a lot of money as an independent (not to mention a considerable number of headaches).
A helping hand
Setting up and running your own company can be a lonely business with long hours and a number of fires to put out on a weekly basis. This can also be incredibly stressful for the business owner who is responsible for managing their business – and their employees – on their own.
As a franchisee, you’ll find yourself backed up by a support network in the form of the franchisor, as well as an opportunity to share advice and inspiration with other franchisees. When first starting out, this kind of support can be invaluable as you navigate your way through the tricky business of running a company.
Conclusion
So, at the beginning of this article, we asked if franchising is likely to die out as a business model. The answer to this is a resounding ‘Hell no’. History has shown that franchising is an extremely safe and lucrative proposition – even during a global pandemic.
While there is, of course, no guarantee of success, buying a franchise rather than starting a new business from scratch is kind of like jumping out of a plane with two parachutes rather than a single, slightly moth-eaten one.
