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Franchising 101 - Benefits of Owning a Franchise

Understanding the key benefits of franchise ownership is another key to your evaluation process. Consider the following:

An Existing Franchise Is a Turnkey Business. Many entrepreneurs have the skills to run an existing successful business but don’t have expertise in all it takes to get a business up and running, whether that's obtaining financing or negotiating lease terms.

Buying an established franchise in a well-designed system can eliminate much of the hard work: choosing a territory, finding a location, negotiating a lease, finding reliable contractors to complete a build-out on time and on budget, establishing vendor relationships, etc. You may also be able to start a business with trained staff already in place.

However, you will still need to do research working with your Franchise Consultant. Aside from the transfer fee, your fees and terms may be substantially different than the sellers.

Proven System in Place. When you buy a franchise, you buy a system, an entire method of doing business. Franchises have an established system in place that you must follow to distribute the franchisor's products or services using the franchisor's trade or service marks. Having a proven system already in place eliminates the guesswork and errors a common business owner would normally face.

In addition to exercising some control over franchising operations and the franchisee's adherence to brand guidelines, the franchisor provides the franchisee with franchising leadership and support.

Corporate Image and Brand Awareness. If you buy into a franchise system that is already established, the corporate image and brand awareness is already recognized. Customers are usually more comfortable purchasing items they are familiar w/and working w/companies they already know and trust.

In the consumer's mind, a franchisor's brand equals the company's reputation. Top quality franchisors want to ensure that their customers are satisfied every time they shop at a franchised location and that the franchisee delivers on the franchisor's brand promise.

Higher Likelihood of Success. Buying a franchise is very different from starting a mom-and-pop business. Since there is an already established system in place, there is a higher likelihood of success. If you invest in a proven franchise opportunity and follow the system the franchisor has put in place, you should be on your way to running a successful business.

Easier to Obtain Financing. Lenders are usually very comfortable financing the purchase of a franchise because franchises already have a proven track record. Bankers usually look at successful franchise chains as having a lower risk of repayment default and are more likely to loan money based on that premise. In addition, some franchise systems will provide in-house financing or leasing options. Many systems also offer special discounts for veterans, via the VetFran Program.

Training. Most franchise companies offer a training program that is typically held at their corporate offices, plus additional training that occurs at the actual franchise location before the grand opening. The franchisor will train you to run your franchise the same way their other franchised locations are run. It will ensure that you are running your business efficiently and will help to eliminate any common mistakes a new business owner usually faces.

Ongoing Support. When you buy a franchise, you have the support of the franchisor and the support of knowing you are part of a growing system. You will always be able to pick up the phone and ask questions of the franchisor or even other franchisees. Established franchisors typically also have field staff who can visit your location to provide coaching and consulting if needed.

Marketing. The franchisor typically takes care of handling the system marketing; these costs are covered by an Advertising Fund (sometimes called a Brand Fund). The franchisee is also usually required to spend a certain amount of local marketing. The franchisor should have an outline for you to follow, will supply graphics and marketing material templates, and sometimes will have specific vendors for you to use.

Exclusive Territory. When you buy a franchise, you are usually also buying an exclusive territory, or protected territory, in which to do business. Franchisors only allow a certain number of franchises to be open within a certain geographical region. You will usually be entitled to a certain area, and no other franchises (w/in your franchise system) can be open within that area.

Own Multiple Locations. Being a part of a franchise system can offer you more opportunities to grow within the system. Once you have become a successful single-unit franchise owner, you may have the opportunity to become a multi-unit franchise owner.

Regardless of the type of franchising model or arrangement, there are also two important features that are common across all forms of franchising:

Consistency: a franchisor spends a huge amount of money and time on building and testing systems and processes that work. They then rely on each franchisee to consistently use those systems and processes to keep their customers’ experiences the same across all of the franchise stores.

Compliance: as part of the agreement they sign, franchisees are required to comply w/the operating procedures that their franchisor sets. As a result, the system changes that a franchisee can make without the franchisor’s agreement may be limited. But, on the up-side, franchisees know the system works (as long as they continue to work the system, at least). 

Our team is ready to answer your questions and guide you through the process to Business Ownership.


5/31/2021