Becoming your own boss through franchising

Franchise is considered a smart alternative to starting a business on your own. ADEMOLA ALAWIYE highlights reasons why it is seen as a better option.

For entrepreneurs seeking to invest in a business with a higher probability for success, it is no surprise that buying a franchise with a proven business model and ongoing management support is so attractive.

When starting a business, there are many factors that need to be taken into consideration. According to experts, the types of product or service, source of financing, the location where the business will be operated among other factors are key considerations. They, however, say when it comes to the business model, it is important to decide whether a new model should be designed or an existing model should be adopted. This is where the option of franchising can be clearly considered.

The Regional Development Director, WSI West African, Mrs. Karibo Ekeopara describes a franchise as an authorisation to sell a company’s goods or services in a particular place. Put differently, a franchise is a business established or operated under an authorisation to sell or distribute a company’s goods or services in a particular area for a defined period.

While some people argue that starting a business from the scratch is ideal, there are strong facts that support the idea of getting a franchise. According to experts, the following include reasons why franchising should be considered:

Risk minimisation.

Starting a business is risky; Studies have shown that 90 per cent of new businesses fail within the first three years. The main reason the failure rate is so high, according to Ekeopara, is because the owners have to go through the learning curve of operating that specific type of business. However, franchising reduces that curve drastically thereby increasing chances of business success because of proven products and methods.

The selling power of a recognised brand

Instead of starting the growth curve of building a brand name, a franchise enables a new business to build on an existing brand name, automatically transferring existing privileges, which takes years to develop, to the new business. Ekeopara says, “A franchise provides an established product or service which may already enjoy widespread brand-name recognition. This gives the franchisee the benefits of a pre-sold customer base which would ordinarily take years to establish.” Generally, customers prefer to patronise an already existing brand because they already have an idea of the level of quality to expect.

Use of an established business model

For new businesses, the hassle of developing a fresh business model is greatly reduced with the acquisition of a franchise. Many elements of the model are standard operating procedures established by the franchisor. Experts say the most difficult part of a new business is its start-up, since even experienced managers lack the knowledge to set up a new business. Leveraging on the existing model of the franchisor helps the franchisee to focus on other aspects of starting the new business.

While a franchisor provides a defined, proven business format or method of operation offering a product or service that has sold successfully, an independent business may be based on both an untried idea and operation.

Clear knowledge of investment cost

Before a franchise is acquired, the franchisor makes available the costs associated with operating the new business. The franchisors representative will verify that the new business owner has sufficient assets to invest in the business and the required corporate franchise fee. The advantage of the stringent financial requirements is that clear information is available about investment costs. When starting a business from the scratch without the benefit of a franchise, the new business owner will most likely run into unexpected costs.

Initial training and ongoing support

Ekeopara points out that the franchise usually provides corporate training for the new business. She says, “Most franchises offer training in every aspect of the business including; management, marketing, bookkeeping, inventory control, security and human resources.” She adds that many franchises provide access to business consultants and mentors, generally other successful owners from within their franchise network, who can offer professional advice to assist new franchisees in the early days of their business. Some other franchises offer ongoing training and support to ensure that the brand adapts to the changing needs of their customers and operating environment.

Shorter time to start the business

Experts say with a franchise, the kick off to the business is made faster and easier because of the already set methodology and an already existing standard operating manual. This gives structure to the business even before it fully embarks on its operations.

Regional advertising campaigns

Investment expert, Mr. Kola Adebiyi, says being part of a franchise means a business is part of national or regional advertising that is managed, contracted and possibly paid for by corporate or regional headquarters. He says, “Advertising campaigns continue to increase brand awareness and drive traffic for a business. Therefore if the business decides to secure additional advertising time, the cost will be greatly reduced sharing it with other franchises in the territory.”

Fellow franchisees available to provide advice and support

Most franchises work collaboratively to ensure that the brand succeeds, this serves as a form of comfort to the new franchisee that is still learning the ropes of the business. For some franchises, they attach an already practicing franchisee to the new franchisee to act as a mentor providing valuable advice and support.

Assistance with securing funding

In some cases, it is possible to receive assistance in financing a new franchise through the franchisor, which could make an arrangement with a lending institution to lend money to a franchisee. However, the franchisee must still accept responsibility for the loan, but the franchiser’s involvement usually increases the likelihood that the loan will be approved.