Financial Poise

The Advantages of Franchising (and Some Disadvantages)

The franchise industry is booming, as more and more people take note of franchising advantages. Chances are you’ve already engaged with a franchisee at some point today, whether it was stopping in for a morning coffee or hitting the gym to burn it off. But becoming an actual franchisee is different than frequenting one.

Investing in a reputable brand with a proven model for success that people trust is a sensible decision for most aspiring ‘would be’ business owners. What’s more, with the variety of franchises available across a plethora of industries, the franchising advantages are endless.

However, while franchising is an extremely attractive model, here’s why it’s not suited for everyone.

‘Already doing it’ syndrome

Franchising types are incredibly diverse, as virtually every type of business and business model is franchised in one form or another. Many individuals can envision themselves as franchisees of a particular brand because they have, in a past or present life, been doing exactly what the franchise offers.

The biggest hurdle here is that the individuals in question have usually been doing ‘it’ as a hobby. They firmly believe that as a long-time hobbyist, they know all the ins and outs of the process, require minimal training and are already well on their way to instant success under a brand name. The reality, though, is that hobbyists don’t always make successful franchisees.

That’s because running a business and having a hobby are two very distinct and separate situations. As a hobbyist, you have no structure, timelines or reporting responsibilities and certainly no bottom line requirements. Hobbyists can stop and start when they please, and even walk away from a project for a week or two with no adverse effect. A franchise, on the other hand, requires regular hours and a work ethic. What’s more, franchisors expect more of their franchisees, as they have a brand to maintain and service standards to meet.

Rarely can even a keen and devoted hobbyist convert to a franchise environment. If you are thinking of turning your hobby experience into a franchisee situation, look carefully at all of the ramifications involved.

Jeans and sweaters as your own boss

The old adage of what makes a franchise successful – location, location, location – doesn’t apply anymore. Today, a growing number of franchise offerings present a home-based environment. While this can be very attractive in terms of avoiding long commutes and late nights at the office, it may not be what one might expect.

Many people making the transition into self-employment and entrepreneurship have had long and exceptional careers in large companies – many may have spent decades working for the same business. To find themselves on the move and potentially becoming self-employed represents a serious leap of faith. For those looking at that option and thinking of perhaps a home-based, one-person enterprise, theirs becomes a quantum leap of faith.

In any corporate setting, employees of long-standing understand the structure of the business they work for. They report to someone, and others report to them. There are specified times to do certain things, complete projects, plan and budget, all driven by the corporation. It is a well-planned and disciplined organization. It has a social side, with appropriate safety nets to deal with problems and issues. It also has a community aspect to the business, as one is working in an organization with maybe hundreds of other employees.

Notwithstanding that, a franchise is also a very organized and detailed business, but in a one-person business, many of the organizational aspects just do not apply. Likewise, there is no coffee machine or water cooler for social chit-chat and the like.

The lure of working in your jeans and a sweater may be a big enticement after years of commuting or being part of a high-pressure team, but look beyond the immediate benefit to the bigger picture. It takes a certain type of disciplined individual to be a successful one-person, home-based entrepreneur. If you are a social creature, then maybe you should think again about the lure of wearing jeans to the office every day.

It’s a franchise, so it must be successful

Franchising has a long record of success. Over the years, we have seen franchise brands grow and grow. That growth must translate into success for both the franchisees and franchisors, right? Many individuals start their discovery journey into franchising with a preconceived notion that if it is a franchise, then that spells instant success.

In fact, “despite a shortage of capital, small business is driving economic recovery and job growth in the United States,” according to this article, “Small Businesses Are Key to Driving Economic Recovery.”

And, small businesses represent more than 99% of employer firms and employ 58 million of the nation’s private-sector workforce, the article notes, with small business job creation often outperforming big businesses.

The reality check is that any brand, no matter how well known and prominent it is, can sustain failed locations. This usually happens when the franchisor does not apply its usual stringent review process to would-be franchisees.

With an established brand, if a failure occurs, it has invariably nothing to do with the brand, but rather the franchisee in a specific location. Because this is a problem to be avoided at all costs, franchisors continue to be diligent in ensuring their franchisees understand that being a franchisee is hard work, or at best, smart work.

For would-be entrepreneurs transitioning from the corporate world into the world of self-employment, a franchise opportunity will often represent an ideal vehicle for such a transition. However, those making the journey should always consider the franchise advantages and disadvantages and understand that it’s not an automatic ticket to success.

[Editor’s Note: To learn more about this and other franchising-related topics, you may want to attend the following webinars: IP-101: What Every Founder/Entrepreneur Must Know; and The Very Basics–Forming the Business. This is an updated version of an article that was published on January 5, 2017.


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