The advantages of Purchasing a franchise is a great way to start a business without having to build it from the ground up. In the UK today, there are thousands of different franchise opportunities covering a range of industries. Following a boom in the franchise industry in the 1980s and ’90s, countless brands offering franchise opportunities became household names. Today, everything from hairdressing to pet care businesses offer franchises, with numerous advantages over starting similar businesses from scratch.
In fact, according to the British Franchise Association, ‘franchising has never been in better health than it is now’. Even since the economic downturn of 2008, when there was a slight dip in the number of franchises being taken up, the numbers have been growing steadily. Around 90% of franchises in the UK are reporting profitability, with less than 4% of franchises failing for commercial reasons in the same year (2015).
When you consider that there are around 900 franchising brands in the UK, each with tens, hundreds or thousands of branches, those numbers start to look even more impressive. Especially when you consider that according to Forbes magazine, around 90% of start-ups fail within the first year (with 42% identifying a lack of market for their product as the main reason).
Why buy a franchise?
Below is a list of some of the key advantages that come when you decide to take on a franchise rather than start your own business.
Established place in the market
With a proven business model already in place, you won’t have to spend the countless hours and financial outlay to discover whether or not your product has a market. Franchises have already established a successful business model with a proven track record of delivering a required product or service. So where 42% of the start-ups that fail do so because there is no real need for what they provide, you are already sidestepping those pretty intimidating numbers.
Rather than working for a large multinational or as part of a big organisation, a franchise gives you’re the freedom and independence of a small business. So you won’t just be a faceless cog in a larger business machine, you’ll be calling the shots and, to a large extent, be in charge of your own destiny.
Whilst being the driving force behind your own success is an undoubted pressure, it’s also a proven motivation for success. Just imagine no longer letting anyone else take the credit for your business wins.
Although you’ll be the boss, you will also have the support of a much larger organisation available to you. You’ll get a substantial amount of help when starting out, as you will be provided with equipment, supplies, instruction, staff training and even assistance finding and acquiring premises. All the things that can be terrifying when going out truly on your own are made easier by the assistance of people with knowledge and experience. That’s invaluable for a new business.
You may also reap the benefit of the parent company’s marketing clout too, helping to put you on the map in a way that has been proven to drive results.
Capital and buying power
You’ll also benefit from the collective buying power of the parent company. This means that as they buy in bulk you are able to get much better deals than if you were just buying small amounts for your own localised usage. Inventory and supplies are therefore much less than if you were starting and running your own independent company.
Capital is the most common barrier to expansion faced by many small businesses. Especially after the worst excesses of the credit crunch following the years 2008–09, it was even more difficult to secure funding from any source. The cost of equity soared and prevented many small businesses starting or growing. However, the franchise model is a natural antidote to this lack of outside capital investment. As the franchisee signs leases and commits to contracts with the franchisor (in whose interest it is for the venture to succeed), the risk is significantly reduced.
Speed of growth
Every new business will faces the dreaded ‘worst that can happen’. Namely that someone else will beat you to it. To exploit a gap in the market you need to be able to move quickly and efficiently. However, if you’re starting by yourself, very often the time it takes to get established means you miss your window.
With a franchise behind you, once the gap is identified, things can move very quickly. You can leverage the experience, resources and more from the parent company to get the ball rolling quickly. This includes areas like marketing, staff training and finance.
Perhaps the most important feature of any brand is the loyalty of its customers. That’s because it takes years to build up clients who come back time and time again. When you buy into a franchise, you are already benefiting from the years of hard work put in by others to attach loyalty and prestige to a brand. It’s like buying a business with built-in customers. That’s why so many franchises are able to survive the otherwise very tricky first couple of years.
Franchise territory exclusivity
Once you have set up your franchise in an area with an identified need, the last thing you need is a competitor coming in and halving your profits. As part of your contract with the parent company, you will get exclusivity rights to specified areas, meaning you won’t face competition from a competing McDonald’s..
Are franchises better value?
Franchises are usually valued at a higher multiple than normal businesses. That’s because of the combination of faster growth, increased profits and the powerful leverage of the parent company. So, when it comes time to execute your exit strategy and sell up, you will get more than if it was your own business built from the ground up.
Better success rate and reduced risk
As we have seen, the risks associated with starting any new business are real. With the odds stacked against you (remember that nine out of ten start-ups fail within the first few years) it can be crucial to do everything you can to minimise risk. With a franchise behind you, the risks of failure are significantly reduced. You can count on a successful model, vast network of experience and increased buying power to give you a leg up in a tough market place.
Of course, starting any new business – even a franchise – takes a huge amount of dedication and hard work to be successful. The difference is, with a franchise you can be more certain that all this hard work will be rewarded, rather than crumble at the first sign of adversity. If you’re looking for a business opportunity that minimises risk and maximises potential, then a franchise could be your best bet. With a huge range to choose from in the UK, covering an assortment of different industries, there’s sure to be a franchise that can work for you.
Take a look around our site today to find out more about the benefits of franchising, the franchise model and franchise opportunities in your local area.
Source: Franchise UK