Why do so many entrepreneurs who want to own their own business enter franchising instead of starting a business from scratch?
“I am a huge fan of the franchise business model,” says Roland Spongberg whose company, WKS Restaurant Group, owns and operates 25 Denny’s in California, Nebraska, Missouri, and Illinois. “It allows us to focus on doing a few basic things very, very well, while leveraging the franchisor’s expertise to achieve sustained successful growth of our business. For example, we know a lot about managing teams of people to deliver excellent guest experiences every day, but do not need to be experts on menu or product development, advertising, public relations, or franchising law, etc. since Denny’s corporate team is.”
The following is a break down of some of the advantages entering into business for yourself via franchising instead of implementing an idea from scratch offers.
- Get out of the startup phase faster. A franchise comes with a proven system. You’ll immediately receive training, checklists, forms, procedures, marketing and more. This helps you get out of the unprofitable startup phase and on the path to profitability faster than if you started a concept on your own. Keep in mind that you’ll still have costs such as loans, franchise fees, business expenses, payroll and other overhead, so just like with any small business you should thing long-term success.
- You’ll receive valuable guidance. Members of the franchisor’s corporate team are responsible for helping you be successful so will assist you with any challenges you may have. In addition, you’ll be able to tap into the experience of your fellow franchisees. Many franchisors also communicate best practices to franchisees on a regular basis as well as at annual meetings.
- Deliver on consistency. The franchisor’s proven and clear concept will make it possible for your team to consistently meet customers’ expectations. Consistency is essential when it comes to building a good reputation as well as repeat business.
- Increase the likelihood of attracting and keeping good employees. High caliber employees tend to seek out companies that are professional, well run, and have a good culture. Since franchisors have already worked out the business’s kinks, when you open your doors you should be able to deliver on all of these fronts.
- Be able to focus on growth vs. day-to-day operations faster. Depending on the franchise concept you choose, the system the franchisor provides should facilitate your removing yourself from the day-to-day operations faster than if you started a business from scratch. For example, the comprehensive training your franchisor delivers makes it possible for others to be quickly and effectively trained to fill your shoes. The franchisor will also help you with strategic marketing campaigns and material, sales support, software that facilitates running your business, and more. The fact that the franchisor takes on so many of the roles an independent business owner would have to assume himself or hire many people to handle, frees you up to focus on strategically growing your business.
- Group Purchasing. Independent business owners do not have the buying power to qualify for the discounted rates on purchases that franchisors negotiate and pass on to their franchisees.
- Improve the resale value of your investment. When you buy a franchise, you buy a brand name as well as a proven business model. These two factors combined, typically make franchises more valuable than an independent establishment.
In case you are weighing investing in a franchise vs. starting a concept from scratch, consider the thoughts of Mateusz Dabrowski, who owns PJ’s Coffee of New Orleans in Gonzales, Louisiana with two silent partners.
“Business ownership is wonderful, however oftentimes it is plagued with tons of barriers to entry. There are always things you don’t know, growing pains, consistency issues, sourcing problems etc.,” says Dabrowski. “A lot of these issues are completely avoided by being part of a tried and true franchise system. The franchisor helps you on all fronts including marketing that reaches new and old customers, corporate sourcing oversight to maintain the product’s long-term perception in the eyes of your consumers, training and more. Most independent businesses can’t accommodate for a specialist in every field to help you stay ahead of the game. This is where franchising truly shines.”