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5 Advantages of A Franchise
By Dan Citrenbaum
“You are in business for yourself, but not by yourself.”
We have all heard the stories. Sometimes a statistic is sited. Other times someone might tell us a story about how an acquaintance had a big success with a franchise. Regardless of the specific story, we have all heard something about franchises being more successful than other businesses. Why is that? What makes a franchise more successful? Five advantages are usually given:
You have Time Tested Instructions You Can Follow.
With a franchise, you are given the instructions for how to be successful. You are not the first person to become a franchisee with that company. They have done it before. Because they have done it before, they have learned what works in building a successful business.The franchise company will share what they have learned. They will teach you the simple methods of being successful. If you follow their recommendations, you too will have a very successful business.
With a Franchise You Have More Support.
There is a principle that underlies the entire concept of franchising: The franchise company makes more money when you make more money. Because of this simple concept, the franchisor will be staffed with employees whose entire function is to support people like you - the individual franchisees.When you have a problem or a question, the franchisor has someone with expertise in that area to help you. Your question might be about IT, advertising, staffing or any other area. The franchise company will have someone who can help you. Why would they do this? Because if they can make your problem go away faster, then you will be able to build your business faster. And if you build your business faster, you will make more money for both you and the franchisor. Due to this support, if you explore franchising at all you are likely to hear people mention this foundation of franchising: You are in business for yourself, but not by yourself.
The Franchise Disclosure Document Gives You Valuable Information.
In the U.S., franchises are regulated by the Federal Trade Commission. The FTC requires every franchise to publish a document that provides in-depth information on the franchise company. This document is the Franchise Disclosure Document, usually called the FDD. The FTC goes as far as telling the franchise companies exactly what information to include in the FDD. The FTC actually writes the table of contents for the FDD, so that every franchise has the same information in the same order. This is to ensure you can find the information you want as easily as possible. Information that is in every FDD includes litigation history, if there has ever been a bankruptcy, and the background of senior management. They even give you a list of all of the franchise outlets. You can see how many have joined or left the system over the past three years.
Franchisees Have A Higher Rate Of Success.
According to the business magazine AGBeat,
start-up businesses fail at a rate of 92%.
But franchises have a much higher rate of success. The statistics vary depending on who publishes those statistics. (Beware of overly aggressive self-promotion by some franchise companies.) The U.S. Small Business Association reported that, extrapolating from charge-off rates for SBA loans,
only 6.5% of franchises failed.
(A study of all SBA loans from 2001-2006.)
Free Research Before You Buy.
When considering a franchise, you have the opportunity to gather much important data. This includes the ability to interview as many franchisees as you like – whether they were successful or not. There is a requirement that franchise companies must give you a list of all of the franchisees. You get their name, address, and phone number. You can call as many franchisees as you like. You can ask them all sorts of questions about their experience. Are they making money? What is the competition like? What does it take to succeed? And the most important question: Would you make the same decision again? The franchisees have no reason to tell you anything other than their actual experiences. When they investigated the franchise, they probably made the same kind of calls. This is their chance to repay the favor. And nobody knows as well as the franchisees exactly what it is like to run their businesses.
Your research must be combined with an honest assessment of your skills. Don’t be over confident about your ability to excel in every facet of the business. But if you do your research honestly, you too can be one of the many successful franchisees benefiting from all of the advantages a franchise can offer.
Dan Citrenbaum is a Franchise Coach and Entrepreneurial Consultant, and is a franchisee himself. He has spent over 25 years helping small business owners start and grow their businesses, in order to achieve their dreams. He offers a free service to help people find an existing business to buy, or a successful franchise to start. View his company’s web site at www.EntrepreneurOption.com Mr. Citrenbaum can be reached at
or at (215) 367-5349.
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