Why investing in a franchise is safer than running an independent business
There are plenty of daunting disadvantages to starting an independent business. There’s the huge financial risk, difficulties in developing relationships with suppliers, and for the most part, zero guidance or support.
This is where opting to invest in a franchise can provide business opportunities to those looking to set their own path. Here, we have a look at some of the factors that make franchising a safer bet than investing in an independent business.
Lower start-up cost
Although some franchises require large capital investment, there are other opportunities with just as much potential that require lower capital commitments. Cleaning franchises, for example, can be bought for as little as £10,000, compared with popular brand franchises that have start-up costs ranging from hundreds of thousands of pounds to millions.
By comparison, one of the most common errors made by new independent businesses is poor cash management. The huge start-up fees often mean that investors run out of money quickly before their business can turn a profit.
Franchises are trusted brands within communities and for the bigger names, they are trusted brands worldwide. This is another advantage over starting an independent business, since starting from scratch and building a good brand image that clients trust can be hard, and at times can fail to happen. With a franchise, the investment is being made into a proven business concept that’s been tried and tested.
Brand recognition also means that it’s easier to get access to loans from banks, which recognise that investment into a franchise with a proven business concept is less risky than starting a new independent business.
Support and security
One of the most daunting parts of starting a business is the overwhelming amount of responsibility. For independent businesses, there are advisors and entrepreneurs in the same field that can be consulted, but for the most part advice from competitors or friends is subjective and it doesn’t work the same for every situation.
In comparison, franchise models offer training, guidance and ongoing support throughout the business journey. This is because if you succeed, so does the franchiser. You can also find great support from other franchisees who are going or have been through the same challenges.
Variety of sectors and opportunities
Those looking for a career change or to learn a new sector will find that there is a range of opportunities that spread across most vertical markets. From pet franchises to property franchises, there is almost always something to interest everyone.
By the time it takes an independent start-up to establish a good brand image, regular client base and all the other nuts and bolts that take to ensure success, a franchise has already established itself and started turning a profit. Less time is spent on details that new investors would have to learn, such as perfecting marketing campaigns, since the franchise is already backed by an experienced franchiser that knows what works.
A franchise is less likely to fail
The reality is that the majority of new independent businesses fail within the first few years. This is not the case for franchises, as the investment is being made into a business that’s based on a proven concept. Common difficulties that often lead to the failure of start-ups, such as finding a suitable location, don’t affect franchises. Franchisers already have the necessary experience to know what works.
A survey carried out by Natwest and the British Franchise Association saw 93% of franchises in the UK report profitability, whilst in the US, a study by the consultancy firm FranNet showed that 92% of its franchise placements were still in business after two years.
Suitable for investors with little to no previous experience
Due to the large support network available to new investors, franchise opportunities make great opportunities for those new to business investment. They provide a blueprint to success that guides newcomers on what to do and what to avoid. This is far safer than investing in an independent business without any previous experience. Without a support network and established blueprint for success, new investors could potentially lose their money in a venture doomed to fail.
A network of trusted suppliers
After buying the franchise, your franchiser will provide a list of trusted suppliers that provide services usually at lower prices. This can be a difficult step for independent businesses since suppliers are unlikely to offer better rates when building new relationships.
Although there is no investment in the world that can be guaranteed to turn into a success, the franchise industry has proved that it’s a fantastic opportunity for business-minded investors that are looking for low-risk opportunities and a network of support that can guide them to success.