Small Business Articles
Buying A Small Business Franchise Vs. Non-Franchise Businesses
April 30, 2008
For many people, starting a new business can be a pretty daunting task. From finding investors and raising capital to putting together a business plan, it's hard not to feel like you are getting in over your head very quickly. Once you finally do get your business up and running you begin to face another massive set of obstacles including branding, advertising, customer base and simply keeping your head above water.
Another option that many entrepreneurs and people considering starting their first business find helpful is the prospect of a franchise. Not only does a franchise provide a proven and established business but many franchises include extensive training, web sites/online stores and the marketing power that comes with a well known and successful brand. Considering the advantages, it's not surprising to find out that on average 97 percent of franchise businesses succeed after the first year with only 67 percent of small business startups sticking around. Look ahead a few years and the numbers become a bit more staggering with 23% and 18% after 5 and ten years for small business startups with franchises remaining in the nineties at 92% and 90% respectively for the 5 and 10 year marks. If you are a seasoned entrepreneur or simply someone looking to get their feet wet with a new small business, consider the advantages of going with an established franchise rather than taking the gamble of starting your own new business.
One of the common critiques of a franchise business is that the franchisee will lose all of their freedom or creativity as they will just be opening a clone of another business. While a franchise does lock you into a specific business model, consider that there are thousands of different franchises spread across nearly every industry and even sub-sections of different industries. If you can think of a good idea for a business, chances are that there is already a franchise out there doing something very similar and if you are willing to sacrifice a few entrepreneurial freedoms and build your business from a franchise you will not only be able to choose the specific industry and company to get behind but you will also be able to enjoy all of the benefits and higher success rates that come with a franchise business.
The job specific training and ongoing support that many franchisors provide to franchisees is another advantage that a franchise has over a new startup. Consider that to start a new business you would need to either have experience or education of some kind to be able to know what you are doing but with a franchise you open your options up to the possibility of trying something new and the flexibility of being able to get into a market that is booming even if you know very little about it; i.e. suppose you had spent the better part of your career in construction as a general contractor and decided you wanted to start your own business knowing that there is a great deal of money to be made in computers but not knowing enough about it to start off on your own. Enter a new tech franchise that specializes in sending qualified computer technicians out on call to fix customer's computers. You open up a franchise, get some basic training and certification for you and your new employees and immediately you have a company in a high-growth, high-tech industry that would not have been possible without years of school or specialized training.
One of the most important things that you are paying for when you purchase a small business franchise is the brand and marketing that comes along with it. Many similar franchises will vary greatly in price based on how successful the brand has been and therefore how successful it will likely be for the franchisee. This is something to take into great consideration when you are contemplating starting a business franchise. Franchise businesses can be bought for as little as one thousand dollars but while buying a low-cost franchise is the right move for some, depending on your situation it may be worth it to spend a little more to get a more established brand name. With a newer or lesser-known franchise, you will most likely have to do quite a bit of work to get your business noticed and to develop a sizeable customer base while with a well-know and established franchise you will be freed up to spend your time working in your business rather than working on your business.
While a small business franchise will surely not be the end-all-be-all for every entrepreneur, it certainly is a great option for many prospective business owners who don't want to spend their time and money making taking the same risks and making the same mistakes that others before them have already made and paid for. Before you start your next small business, investigate the field you're considering to see if there are any franchises out there doing something similar to your plan. Not only will you gain the training and support of an established franchise company but you'll also increase your odds of survival nearly five fold.
For many people, starting a new business can be a pretty daunting task. From finding investors and raising capital to putting together a business plan, it's hard not to feel like you are getting in over your head very quickly. Once you finally do get your business up and running you begin to face another massive set of obstacles including branding, advertising, customer base and simply keeping your head above water.
Another option that many entrepreneurs and people considering starting their first business find helpful is the prospect of a franchise. Not only does a franchise provide a proven and established business but many franchises include extensive training, web sites/online stores and the marketing power that comes with a well known and successful brand. Considering the advantages, it's not surprising to find out that on average 97 percent of franchise businesses succeed after the first year with only 67 percent of small business startups sticking around. Look ahead a few years and the numbers become a bit more staggering with 23% and 18% after 5 and ten years for small business startups with franchises remaining in the nineties at 92% and 90% respectively for the 5 and 10 year marks. If you are a seasoned entrepreneur or simply someone looking to get their feet wet with a new small business, consider the advantages of going with an established franchise rather than taking the gamble of starting your own new business.
One of the common critiques of a franchise business is that the franchisee will lose all of their freedom or creativity as they will just be opening a clone of another business. While a franchise does lock you into a specific business model, consider that there are thousands of different franchises spread across nearly every industry and even sub-sections of different industries. If you can think of a good idea for a business, chances are that there is already a franchise out there doing something very similar and if you are willing to sacrifice a few entrepreneurial freedoms and build your business from a franchise you will not only be able to choose the specific industry and company to get behind but you will also be able to enjoy all of the benefits and higher success rates that come with a franchise business.
The job specific training and ongoing support that many franchisors provide to franchisees is another advantage that a franchise has over a new startup. Consider that to start a new business you would need to either have experience or education of some kind to be able to know what you are doing but with a franchise you open your options up to the possibility of trying something new and the flexibility of being able to get into a market that is booming even if you know very little about it; i.e. suppose you had spent the better part of your career in construction as a general contractor and decided you wanted to start your own business knowing that there is a great deal of money to be made in computers but not knowing enough about it to start off on your own. Enter a new tech franchise that specializes in sending qualified computer technicians out on call to fix customer's computers. You open up a franchise, get some basic training and certification for you and your new employees and immediately you have a company in a high-growth, high-tech industry that would not have been possible without years of school or specialized training.
One of the most important things that you are paying for when you purchase a small business franchise is the brand and marketing that comes along with it. Many similar franchises will vary greatly in price based on how successful the brand has been and therefore how successful it will likely be for the franchisee. This is something to take into great consideration when you are contemplating starting a business franchise. Franchise businesses can be bought for as little as one thousand dollars but while buying a low-cost franchise is the right move for some, depending on your situation it may be worth it to spend a little more to get a more established brand name. With a newer or lesser-known franchise, you will most likely have to do quite a bit of work to get your business noticed and to develop a sizeable customer base while with a well-know and established franchise you will be freed up to spend your time working in your business rather than working on your business.
While a small business franchise will surely not be the end-all-be-all for every entrepreneur, it certainly is a great option for many prospective business owners who don't want to spend their time and money making taking the same risks and making the same mistakes that others before them have already made and paid for. Before you start your next small business, investigate the field you're considering to see if there are any franchises out there doing something similar to your plan. Not only will you gain the training and support of an established franchise company but you'll also increase your odds of survival nearly five fold.
