Owning a franchise can be a great way to start a business with less risk or to invest in businesses with proven scalability. Owning a franchise requires an understanding of what a franchise offers and the benefits vs the negative components that come with franchise ownership versus entrepreneurship.
First, a large percentage of franchisees are made up of new business owners, people who are starting a business for the first time. This is one of the driving forces behind franchising is that the franchisee is provided with the tools, systems, support and training to increase their odds of success as they start a new business.
What I have found in my time in the franchise market is that many franchisees do not understand that this still means a lot of hard work, dedication, hours and time to make the franchise business work. The franchisor's role is not to run the business for the franchisee, but to support and provide guidance. My advice to a franchisee is to look to your franchisor as you would a business coach or advisor, not an employee.
Second, franchising is not a sure bet, there is still considerable risk in starting a new business. Although owning a franchise drastically increases your success rate, you still can fail as a business owner. Knowing this going into the relationship should help you plan, research and get to know the market prior to making a franchise investment.
There is an extremely large percentage of franchise owners who own multiple units of one or more brands and focus on finding franchise systems which have the systems and market opportunity to scale. These franchisees are looking for unit economics, system validation and management team resumes.
Multi-unit and master franchisees invest in franchise brands because they see long-term value in where the business is headed and value in the franchise structure they pay for.
Regardless of what is driving you to consider owning a franchise, you should understand the inherent risks associated with starting a business first, then get to know the franchises you might consider. Review the franchisor's track record, speak with franchisees, take time to understand the FDD and go into the business relationship with appropriate expectations.
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