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Why Franchising Is The Safest Path To Business Ownership


January 29, 2020
Why Franchising Is The Safest Path To Business Ownership

You may be dreaming of professional independence, but which path should you take?

Starting a business is rarely easy or predictable. Few people know exactly what they’re getting into, and even less are able to stay the course long enough to generate a healthy profit. But there are many other routes to business ownership than running a startup.

Buying a franchise might just be in your best interest; there are plenty of reasons why it’s considered safer. We cover a few of them here.

A ready-made business model

Startups have to contend with hundreds or thousands of other businesses just like them. It may take a while to carve out a niche or beat the local competition. It’s no wonder that 80% of new businesses fail in their first two years. A great business idea needs to be proven, after all.

But there are a number of other reasons why small businesses fail, according to Hiscox. They include:

  • Insufficient planning
  • Heavy reliance on a few clients
  • Little marketing or analytics support
  • Poor management
  • Lack of customer understanding

A new business owner may have the ambition to launch their concept, but could fall short on one or more of these areas. Often, it takes a significant amount of hard work to test an idea and ensure it’s a viable way to earn.

Franchise business models, on the other hand, are far more assured. They already produce a profit for other business leaders. The franchisor knows who to sell to, how to minimise costs, and which skills are most relevant to the job at hand.

And this knowledge, gathered by the franchisor over many years, will be passed to you at the training stage. With ongoing support too, business ownership becomes easier from the start – you can have full confidence in the service, product and key markets.

A head start

Another benefit of an existing business is the speed at which you can start making a profit. Franchise agreements ask that you consider what needs to be in place before opening day, so that you can get started with plenty of momentum behind you. That’s why franchise failure rates are just 5%.

During the planning phase, you’ll also be asked to form a business plan that measures the local competition and identifies why your branch can beat similar businesses. Having an understanding of those USPs will give you a much stronger start.

That’s not to say you’ll be left on your own on day one, however. Again, the tried-and-tested business model can help here.

You don’t have to wait for marketing to stoke interest around your brand – it’s already established. Similarly, the sales process has a clear direction. Admin tasks are less stressful to work out because you have other examples to follow, provided by your fellow franchisees. Therefore, you save time and can focus on your earning potential.

This is especially true if you’re purchasing a franchise from someone else. National and international brands occasionally offer resale opportunities, where the previous owner will have built a local reputation. You can take control of their existing contacts, reach out to lapsed customers, and develop what they give you.

Reliable mentorship

Business experience and mentorship is vital. Some markets can be turbulent and other factors – such as staffing and cost control – may present a real challenge, so it’s good to have help.

But to get it, traditionally, comes at a cost. SME owners will often find a business coach or advisory professional to guide them. They may place themselves on training and professional development courses, or alternatively find other business leaders that are a step ahead. All of this takes time and resources.

A franchised business presents something wholly different – in-depth, continuous guidance. Whenever you want advice, you can ask for it. The franchisor should be reachable by email or phone for any queries, and you also have the support of the wider franchisee network to rely on.

With 92% of small business owners claiming that mentors have “a direct impact on the growth and survival of their business”, franchising presents a huge advantage over other business models, further reducing the risk you may otherwise face.

Funding access

Some brands can be started for virtually nothing. Others take tens of thousands of pounds, depending on what you want to do. In that case, it’s likely you’ll be looking for finance.

But there’s a barrier to third-party investment for a small business: banks and traditional lenders are less willing to lend than they used to be. The reason? The 2008 financial crash, as well as greater reliance on collateral, increased regulation and lenders’ preferences for larger loans.

A successful franchise offers another route – specialist funding from lenders they’ve used repeatedly over many years. Those in charge of finance trust the franchisor, which makes them likelier to trust in you.

As our guide to franchise financing explains, you could secure 50% of the start-up fee from the lenders that the franchisor has a relationship with. And that leaves you in a much better position for business ownership.

Join Rainbow today

While nothing is guaranteed, opening a franchise can limit threats to your success and profitability. You will still be paying ongoing royalties, as a franchise rule. You’ll also have to stick to standards of service, conduct, privacy and process management. Beyond that, though, the branch is yours.

In summary, you’ll avoid:

  • The pressure of creating a workable model for goods or services.
  • Extensive effort spent on finding a market, promoting yourself from scratch, and earning those very first contracts.
  • Heading into business ownership without guidance from experts.
  • Raising the start-up funds alone, or facing rejection from traditional lending channels.

Ready to run your own business? A specialist cleaning and restoration franchise could be the answer. Rainbow International can develop and add to your skill set, helping you serve a community with deep cleans and disaster recovery. Enquire today for more details.