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Choosing Whether To Start A Franchise Business

There are 23 million small businesses in the US, of which a good number are franchises. While many people have the aspiration of starting a business for themselves, it can be a long and expensive learning curve if you choose to start fresh. Instead, franchising often provides a typically less risky means of transitioning into a business, with a host of benefits of its own to help drive your bottom line. Franchises are available for many different types of business, across sectors and skills sets. But why would anyone choose to go into business in this way, particularly with the start-up costs required?

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Franchising works by agreement between franchisor (e.g. Subway, 7-Eleven) and the franchisee (the business owner who chooses to buy the franchise). The franchisor grants license to the franchisee to run an outlet of their business, usually tied to a particular geographic area, in return for an upfront cost. An additional cost is usually payable as a share of the levels of business the franchise turns over. But in exchange for these costs, the franchisee gains an invaluable start in their business, plus an array of invaluable advantages and benefits that increase the chances of the venture proving successful.

There tend to be a few main reasons why franchises can be a preferred route. For instance, franchises allow you to sell an established product or service, and will give you the tools and resources to deliver a consistent offer to your customers. The Little Gym is an example of a franchise that allows the franchisee access to a great service, with its TLG franchise kids gyms popular among consumers and franchisees alike. But franchisees are not left to figure out what to do themselves – with ongoing support and assistance from the franchisor, it can be possible to get a franchise rolling without the same difficulties as a new-start business.

Another crucial benefit of a franchise is that it comes with a manual. This might sound simple, but having access to a proven blueprint for commercial success does tend to make running the business easier. The guesswork and ‘trial and error’ type approach goes out of the window – instead, you can benefit from the mistakes of others that have gone before you, and capitalize on the most effective model for making your business profitable. Because the aims of both franchisee and franchisor are aligned, there are often extensive resources available to help franchisees make their outlets a success.

This extends into training, customer service, and even areas like marketing. Centralizing spend for marketing allows for individual branches to feel the benefits of national-scale campaigns, leading to better economies of scale and stronger returns as a result. The profile and scale of many franchises in the US makes this one of the most important advantages for those that choose to run franchise businesses.

Franchises enable entrepreneurs to effectively pay now for a much greater chance of turning a profit in their business. A Starbucks or a McDonalds will probably make money, because these businesses make money in much the same way across the world. By gaining your own access to the products, systems and profile that make these businesses tick, you can ensure your investment is given the best possible chance of survival and prosperity.

 

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