Is Franchising A Viable Business Model For Aspiring Entrepreneurs?
I can say that franchising is a very applicable business model for would-be entrepreneurs in the economic universe of the modern world. For many people, being an “independent” entrepreneur necessarily means being your boss by utilizing franchising opportunities.
On this way to becoming self-employed, prospective company bosses are often spoiled for choice. Some prefer to set up a new company according to their wishes, others prefer to take over an established company that already exists on the market.
But even if you don’t have your business idea, you can become a partner in a franchise system and buy a franchise company which is still working on.
So-called franchising or franchise concept offers entrepreneurs the opportunity to take over and use the current business model. These are special sales systems that enable independent entrepreneurs to market other people’s business concepts, such as products, services or technologies, under license in their name and brand.
The franchisor provides the key input for business success – by granting the franchise partner the right to use its name and brand, its know-how, and existing marketing tools – against payment of a fee, of course.
The franchisor also provides crucial prerequisites such as market tests and analyses or calculation aids and permanently offers its entrepreneurial expertise such as advice, advertising, and training.
What Are The Pros And Cons Of Starting A Franchise Business?
Franchise business models offer many financial advantages but also some risks and disadvantages. There is no doubt that entrepreneurs who want to get involved in the franchise business from scratch are taking on an incalculable risk.
No one can guarantee that their business will develop according to plan. Without a viable concept and insufficient financial resources, start-ups are quickly doomed to failure.
The advantages of sophisticated business systems for the franchisee are obvious. The franchisee not only benefits from the franchisor’s technical know-how and experience but also invests his money in a proven business model. In this way, he minimizes his entrepreneurial risk of financial failure.
In summary, selling a franchise is a viable option, but one that requires careful planning and strategy. It is critical to gather comprehensive information about the franchise system, understand the market thoroughly, and employ effective marketing strategies to have the best chance of a successful sale.
Remember that presenting the franchise, understanding the area in which it operates, and communicating equity needs and other financial aspects are crucial to attracting and maintaining the interest of potential buyers.
How Does Franchising Compare To Starting An Independent Business?
There are some differences between developing a business model independently and a franchising model. In this way, they minimize their business risk of suffering financial shipwreck should they decide to buy a franchise company.
He can also rely on an existing network of suppliers and cooperation partners instead of spending time acquiring business contacts himself.
Entrepreneurs who want to operate in franchising can generally choose between the following options :
As a franchisee, you take on the business idea of a franchisor, receive training, and receive regular support. Your entrepreneurial design options are within a fixed framework. You develop your franchise system.
The basis is your tried and tested business idea. If the idea has proven successful, the franchise system will help you expand with motivated franchisees.
As a master franchisor, you receive the license of a foreign franchise company for the German market. This means you act as a franchisor either regionally or nationwide to acquire additional franchisees on your account.
In summary, it may make sense to purchase an existing franchise rather than starting from scratch. The franchise company has existing contacts, resources, and employees who have already been hired. Apart from the fact that every salesperson will certainly accompany the transition for a while, you can benefit from the experience.
What Are The Steps To Becoming A Franchisee And Choosing The Right Franchise?
There are several basic steps to implementing the right franchise model. As a franchisee, when choosing the right system partner, they must offer you contractually important services. Pay particular attention to the following topics:
To manage a franchise model, you must first choose a franchise partner that is compatible with your financial goals and perspective. You should then determine your area of operation in line with your own goals and expectations. You should conduct detailed analysis and research about the actors in the market and identify potential gains.
Then, you should contact the franchise partners and know the service, and support they offer and the special conditions they expect. You can implement a franchise model with the help of financial consultancy during your franchise agreement.
What Are The Key Financial Considerations In Franchising For Entrepreneurs?
Although franchising is financially advantageous for entrepreneurs, some factors and risks should be taken into consideration. Regardless of whether the entrepreneur buys a company through franchising or starts a new one – he should bring a variety of talents and skills to the table.
To run the business successfully, a high degree of flexibility is required. This includes the consistent willingness to learn and accept new things.
System development: Franchise systems are subject to constant change, which the franchisors also have to adapt to. Please ensure that you are included in all future considerations and informed of any changes.
Franchise advisory boards: Find out whether there is a system, advertising, or product range committee. Through these advisory boards, the partners’ proximity to the market is used and their experiences are systematically evaluated. This is the only way to further develop the business system.
Promotions: Pay attention to the goals of the advertising. It should only serve to sell products and services. Advertising is often used to attract additional franchise partners.
Exchange of experiences: Does the franchisor have well-trained moderators and use modern information technologies such as communication via intranet or video technology?
Training: The franchisor uses experienced experts in its workshops and training courses. Naturally, the need for training is particularly high in marketing, sales, sales training, commercial know-how as well as accounting and tax law.
Controlling: What is important for your future as a franchise partner is how the factors for your economic success are prepared, analyzed, and communicated. The standard of support therefore includes meaningful company comparisons, key business indicators, period comparisons, and expert support in the individual planning of your business.
After the installation of IT hardware and software technologies, problems often arise with the application. A tried-and-tested concept helps you to optimally organize your business processes more quickly. Systems often only prove their worth in a crisis.
Ask the franchisor what specific steps he takes in the event of economic difficulties for individual partners or in the event of setbacks for the system. Especially in the start-up phase, support from the franchisor with advice and assistance with official applications and formalities as well as contractual negotiations with banks, leasing companies, and landlords is almost indispensable.
Can You Share Success Stories Of Entrepreneurs Who Thrived In Franchising?
There have been many successful franchising stories in recent years, and many of them are inspiring for any entrepreneur. Today I will explain some of them as an example for you.
According to surveys by the data, there were a total of around 139,000 franchise partners with 176,200 franchise companies in Germany in 2020. Nationwide, 960 franchise systems generated sales of more than €135 billion. The world’s largest system provider Mcdonald’s achieves annual sales of $10.7 billion with its franchise partners.
In the sports industry, a prime example is the world’s largest network of fitness studios: Anytime Fitness. It has been ranked among the best franchises in the world for 15 years. Additionally, this year they ranked 23rd in the list of the world’s 200 fastest-growing franchises.
Other companies that stand out in the fitness space include F45 Training (a network of gyms dedicated to functional training), Planet Fitness (a gym operator with more than 2,000 locations), and Jazzercise (its classes combine choreography with the rhythm of music).
All the franchises mentioned above indeed require a high initial investment, but you can also look for other profitable franchises that offer innovative services that are very cheap to invest in.
See you in the next post,
Anil UZUN