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Three Reasons to Consider Franchising

by Seth Lederman

Unlike small “mom-and-pop” startups, a franchise is a business method that helps to expand an existing business by providing goods and services through a licensing relationship.

Most people think that they can only dream of becoming their own boss, starting a small business, and the prospects of growing and expanding. The reality is that the only way to accumulate wealth and secure a financial future is to become a business owner. Once you decide to leap into business ownership, that is just the first step. Next, you have to consider what types of industries, business model types, and opportunities are available to you.

You can choose a new business startup, or you can opt for buying a franchise. Both come with their advantages and disadvantages. The key is to minimize risk while maximizing the potential for success and profitability. So which one is right for you?

What is a Franchise?

Unlike small “mom-and-pop” startups, a franchise is a business method that helps to expand an existing business by providing goods and services through a licensing relationship.

Franchisors grant a license to a third party to conduct business under their trademark and trade name, and typically, they also offer things like operating systems help, support, branding, and other perks that make it easy to get the business up and to go and to help sustain its success for those who buy-in.

Business Format – Franchising

In terms of relationships in franchising, there are two types: business format and traditional or product distribution. A business format franchising method is where the franchisor offers the franchisee their trade name, services, and products and usually has an entire system to help operate a successful business.

The franchisor also offers things like site and real estate selection, operating manuals, brand standards, training, development support, marketing and business support, and quality control measures to help get the business up and running and make it sustainable and profitable for the future.

The franchisor hands over the “keys to the kingdom” of success. Currently, there are over 120 industries that use business format franchising to take their product or service to market, including automotive, education, logging, commercial and residential services, retail, food, senior care, medical services, restaurants, and real estate.

A traditional or product distribution format typically has higher sales than a business format. The focus on product distribution is not directly related to doing business but rather on the products supplied or manufactured to the franchisee via the franchisor. The products usually need pre-and post-sale service, as in the automotive industry.

Three Benefits of Buying a Franchise

When it comes to wealth accumulation, the only way to truly get ahead of the curve and stop spending your time helping someone else’s fortune grow is by becoming a business owner. A new business startup is a risky proposition. When you consider that, on average, 20% of all new businesses don’t make it to their second anniversary and that 45% of them won’t make it to the five-year mark, opening a startup business can appear very challenging. Also, when you consider that about 65% of companies won’t make it to ten years, the decision to be a business owner can be fraught with fear and trepidation.

Proven Systems/Business Models

The most successful franchise owners recognize that they may have to get their hands dirty and get to work until things pay off. If you understand that the fruits of your labor will take time to grow and ripen on the vine before being picked, you are m

Franchises differ, however, primarily because although they are technically a “new business,” there is nothing new about them. A franchise is built on a proven business model that also comes with the perks of brand recognition and brand loyalty. Franchises have less risk compared to new business startups, which also means that the average person is more likely to be able to secure financial resources for a franchise as opposed to presenting a new business model to a lender or investor.

There is also no required learning curve. When starting up a new business, you often have to be very well-versed in the industry and have the experience and expertise to guide the company while also working in it. Franchises do not require that you have any experience at all in the given industry you choose. You are handed all the knowledge you need before you even begin the process, which means that you can switch gears from your previous career and hit the ground running with a high likelihood of success.

For a new business startup, you can’t wholly switch paths and start a new venture without becoming an expert. With a franchise, however, all the knowledge you need to run it successfully is given to you; all you have to do is follow the guide as outlined. You are almost guaranteed success without having any real hands-on training or education. It is an excellent way to find something you love to do without all the work of getting up to speed or attending extensive educational training.

In Business for Yourself, But Not by Yourself!

Often, when you begin a new business venture, you do so on your own, and it becomes an issue of making it or breaking it. A new business model, idea, or concept does not come with the guidance of those who have come before; it is a constant road of trial, error, and hard work. However, when you buy a franchise, you’re buying the help and support of those who have already been there and done that. That means that you aren’t reinventing the wheel; you are just picking up the playbook and putting it into motion.

Real estate advice, construction plans, employee training, marketing, promotional tools, systems, and operations are already at your fingertips. That increases the probability that you will be successful; it reduces the risk that you won’t. Buying a franchise also means that you can start making money from day one because you will be ready to go from when you say you’re open. And people will be anticipating your new business because they already know who you are. They can depend on consistency and reliability. They recognize your product or service from the outset.

The Growth Scalability

Growth scalability is also a huge advantage of becoming a franchise owner. Multi-unit franchisees are a great way to continue building your wealth without restricting how much you can fit into one brick and mortar location or how many employees your location needs. When you own a franchise with high scalability, your potential for growth, expansion and profit margins are exponential and ever-widening. With a highly scalable franchise, the sky’s the limit.

With a scalable franchise, you also have very few expenses, including employee salaries, because most of the payroll is based on performance commission, which lowers your risk as a business owner. Unlike traditional business models where you have to pay people on a salaried or hourly basis, you only have to pay people who have already contributed directly to your profit margin with a scalable franchise. Being a business owner is further enhanced by knowing that you have less skin in the game, and you’re increasing your potential for earnings with every new team member you take on.

How to Get Started Exploring Franchise Ownership – The Three Ds: Due Diligence, Deliberation, and Don’t Go It Alone!

If you are ready to become a franchise owner and enjoy the benefits, the next step is to explore the available opportunities. If you head to the internet to see what is open, you will quickly be overwhelmed by the hundreds of thousands of choices. Although franchises have a higher likelihood of success than traditional startup businesses, that does not mean that they are all right for everyone or that everyone will be successful with every franchise. The Three Ds is the most crucial step to finding the right franchise for a satisfying and lucrative new venture.

Due Diligence

One of the best parts of buying a franchise is knowing what the future will probably look like. Franchises have to file a franchise disclosure document, which the Federal Trade Commission requires. This document is generated annually to explain in detail the terms for owning a specific franchise. It is critical to go through the FDD with a fine-toothed comb – or even better, to hire someone who understands the legalese and what it all means.

You will want to pay close attention to things like startup costs and ongoing expenses and weigh them against the potential revenue that the business can generate. Also, consider how much support the franchisor will supply to you both initially and then as you grow. Things like employee training and operating systems help will be critical in getting things up and running quickly and working efficiently and effectively from the start. Finally, consider talking with both former and current franchise owners to get a feel for the daily operations and the real “boots on the ground” experience.

Deliberation

Next, think about other factors outside of the franchise itself. Consider personal factors like your personality style and what you would like to do versus what you don’t want. You also have to take stock of how involved your family will be and how much support they are going to provide.

Make a list of priorities, like what types of industries you think would provide personal satisfaction and improve your work/life balance. Ask the hard questions: do you want to work with customers and be the face of the company, or would you rather be behind the scenes? If you are going to buy a franchise, it will take a lot of your time and energy at the start to get it up and to run. How much time are you willing to sacrifice, and what can you live with and can’t you if you have to?

Don’t Go It Alone

One of the keys to being a successful business owner is learning how to delegate, whether in a traditional startup or a franchise. If you focus your energies on what you do best and let those who are well-versed handle the rest, you won’t be spreading yourself too thin, making decisions without having all the information you need, or going outside your range of expertise. The first business decision you will face is finding the right franchise to buy, then taking all the proper steps to minimize risk and maximize wealth accumulation and work/life satisfaction.

There is no need to dive headlong into figuring out the ins and outs of franchising opportunities, the legalities behind them, or sorting through the many steps you have to take and consider when there are franchise experts like Frannexus there to help. We have been through the process hundreds, if not thousands, of times and dealt with people from all walks of life who have different life circumstances, resources, and ideas about what their goals are going forward. The worst thing you can do is try to go it alone, especially when you don’t have to!

Conclusion

When it comes to securing your financial future and building wealth, not just for the here and now but for generations to come, business ownership is truly one of the only ways to get ahead. Franchising is one of the least risky and most rewarding ways to find satisfaction in what you do while reaping all the benefits of freedom and security that come with being your boss.

At Frannexus, we have all the tools and resources you need to make the most well-informed decision about which franchise has the highest likelihood for success and which one will be rewarding, scalable, and provide you with the rate of return you seek. The statistics are clear: a franchise has a higher likelihood of success than a traditional business startup. There is also a potential opportunity for anyone looking to secure their financial situation. Contact us today to get the process started, and let’s find the perfect fit for your new and lucrative future!

DISCOVER A BETTER WAY TO EARN WHILE LIVING

Profits are Better Than Wages

Tired of putting in hours of hard work while someone else benefits? You can earn money in a way that fits your lifestyle rather than the other way around.

In “Profits are Better Than Wages”, experienced franchise advisor, Seth Lederman answers the “how” and “why” of going into business for yourself.

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Learn about the various franchise industry segments, from Home Services to Beauty, and more. With nearly 4000 available franchise opportunities, understanding the pros and cons of the industries is crucial for a successful franchise search.

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Basics

Are you sick of the 9-5 grind and actively looking for alternatives? Start with the basics of going into business for yourself.

Intermediate

Searching for the right franchise opportunity is like looking for a needle in a haystack. If you want to search smarter, not harder, check out the franchising insights and knowledge to get you there faster.

Advanced

You've decided to explore franchise ownership. Now, making it a reality with tips for vetting, funding and minimising the risk of your franchise investment.

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Do you have questions about investing in a franchise? Check out our comprehensive help center for answers. If you don't find what you're looking for, submit a question and our team will get back to you.

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Assessments

What kind of franchise business will match your skills, experience, passions and even more important...your personality? Answering these questions now, will save you time and grief during your search.

Industry Guides

Learn about the various franchise industry segments, from Home Services to Beauty, and more. With nearly 4000 available franchise opportunities, understanding the pros and cons of the industries is crucial for a successful franchise search.

Events

Having helped hundreds of people get into business ownership through franchising, we are in a unique position to educate prospective franchise investors.

How-To Articles

On our quest to share the best in franchise information, we've developed a series of How-To articles with practical advice to move you forward in your franchise search.

Videos

View our collection of educational franchise videos for large investors and first-time entrepreneurs.

Blog

The FranBlog is a trusted digital publication, providing news and information that entrepreneurs and franchise investors want.

LEARNING CENTER
Basics

Are you sick of the 9-5 grind and actively looking for alternatives? Start with the basics of going into business for yourself.

Intermediate

Searching for the right franchise opportunity is like looking for a needle in a haystack. If you want to search smarter, not harder, check out the franchising insights and knowledge to get you there faster.

Advanced

You've decided to explore franchise ownership. Now, making it a reality with tips for vetting, funding and minimising the risk of your franchise investment.

Help Center

Do you have questions about investing in a franchise? Check out our comprehensive help center for answers. If you don't find what you're looking for, submit a question and our team will get back to you.

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