Is A Small Franchise Business Right For You Or Is It Just Another BIG Headache?
Written by Neil Ashworth on July 13th, 2009 in Investment.
With so many home owners searching for a way to turn their current financial crisis around the option to look at a franchise business opportunity as a ready made solution is starting to appeal to more and more people. The belief is that buying a franchise is a great way to lower the risk of going into business for the first time. Franchise businesses are available in more than 75 industries so the chance of finding the right franchise business looks good for the new business owner fighting for that perfect fit. Franchise businesses are very appealing as they offer ready made structure and support with tried and tested business models. Franchise businesses are the most recognizable within the retail sales segment in America and right now franchise businesses are booming, but we have to ask is a franchise business right for you?
Franchising is a major driver in our economy today. For many, franchising can be a very good way of breaking into business. However, franchising above all, takes that there be a fit between the franchisor and franchisee if its to prove profitable. Franchising has become one of the most popular forms of business venture in the last couple of decades with more and more people looking for a way out of the rat race. Franchising represents more than $200 billion per year in sales in the US alone and with more franchise businesses expanding globally sales in this sector will continue to climb.
But the truth is that franchising is great until a system is oversold and franchises are auctioned off. Franchising is touted as the solution for all would be entrepreneurs who feel they don’t know enough, or are too scared to start a business on their own and make a success of it but is franchising all its cracked up to be?
Today there are literally thousands of alternative franchise businesses to look at for the would be entrepreneur and with no shortage of options it should be easy to find the right fit. But, a lot of fish in the sea doesn’t guarantee a good catch, so before you cast your net make sure you’re looked at all the options.
Franchisee survival rates are similar to independent start-up survival rates over a 5 year period and the truth is that less than 20% of people starting in business for the first time make any real money from it franchise or no franchise. Generally, the parent companies try to offer territories to their franchisees to try to protect them from competition and ensure that the market is not overly saturated but this isnt easy and you only have to look at your local High Street to see how many coffee shops have come and gone in the last five years due to the competition within this particular franchise area. Franchising has always boasted about its high success rate and its low failure rate, but the general figures have masked some terrible stories where franchisors and their banks have given franchisees a very rough time. So, if you are planning to start your own business and looking at a franchise as one of your business options do some research first before you get in too deep and find your franchise sinking in the economic mud.
Even though the franchise agreement is a legal document intended to protect both the franchisor and franchisee, the difficulty comes when the franchisor goes broke and the franchisee is left wondering if they can keep their franchise business intact or if it will sail down the river along with the franchisor. For some, the arrival of a new franchisor can bring a new set of arrangements and with your money at stake it is vital you do a heap of background checks and detailed research before throwing your savings or redundancy into the franchise business pot.
Life as a business owner can be demanding with a new franchise opperation and being new will not protect you against your legal and financial obligations when it comes to things like tax liability, fees and payments. Don’t just take what’s written down on the franchise business website as gospel either and certainly ask a lot of questions of the franchisor before handing over any of your hard earned dollars.
The bottom line is that franchise businesses are everywhere in our towns and cities, and they go far beyond the big fast food chains. Todays franchise businesses are in just about every industrial sector from donuts to tires and everything in between. Franchise businesses may be more successful than stand alone businesses, in terms of surviving the start-up phase, and getting you through the legal framework but dont be fooled, franchise businesses are rarely as hassle free or as much of a guarantee as you might expect.
If starting a small business is what you are looking for there are many options, not just a franchise business so shop around, do your home work and find a business that fits your needs, expectations, budget and mindset.
