There are certainly advantages to owning a franchise, but are they worth the cost and ongoing fees?
All franchises have a franchise fee and some ongoing royalty and brand development rate.
These fees add up year after year as every dollar is collected. To compensate for these ongoing fees, a franchise has to offer value.
I have been fortunate to have started my own business, not franchising, and be a franchisor in the same industry. I can compare my growth as an independent business owner to how my franchisees are doing year by year.
With any franchise, you want the franchisees to have better growth and stronger margins than if they started their own business alone.
The five undeniable advantages of franchising apply to any good franchise.
There are some bad franchises; after reading Rule #4 you should be able to discover them easily.
A good franchisor/ franchisee match can make for a profitable team.
Here are the undeniable advantages.
Undeniable fact #1 Marketing & Advertising
To start your own business, you must create your own marketing and advertising campaign. This huge task can cost $100,000 + easily and take a year or more. The Internet is very competitive with companies that have been investing money and time for years. Whether in SEO, PPC, Google Maps, or social media, they are way ahead of the game.
It’s not that you can’t catch up, but the advantage of owning a franchise saves you years of work and $100,000 in website development and blogs.
Hire an SEO expert to analyze your competition. An expert can tell you in great detail and an hour the work that will be involved for you to get found on Google.
You already have experiences and knowledge that will help you start your own business. Perhaps it is sales, management, or a job in the same field as a business you are looking to start.
Great, everyone has experiences that will aid them whether they start alone or buy a franchise.
The undeniable fact is that most franchises have excellent support, training, and processes for you and the staff.
If your business is to grow, you must record steps and processes for everything. Again very doable, except it takes time.
The advantages of owning a franchise the systems and processes are already in place for you to follow.
In addition, they have almost always been tested and work quite well.
Of course, you have experiences and knowledge that will translate to helping you start your own business or franchise. However, do you have sufficient experience in all areas?
For most people, the answer is no. The advantage of franchising is that you are in business for yourself but not by yourself.
I cannot speak for all franchisees, but our training and support have saved our franchisees untold thousands of dollars.
We had 25 years of experience in the industry before we ever franchised a single unit.
Those 2.5 decades of experience help our franchisees in so many ways.
Whether you are exploring a restaurant or a painting franchise, you can ask franchisees about their experiences.
Franchisees are very honest. If they are unhappy, they will undoubtedly tell you.
You can ask franchisees anything, including income, support, level of regret, or excitement.
The due diligence process is like having a crystal ball into your future.
There are many hats when operating both an independent business or a franchise. And the success of either model will typically fall on the owner/ franchisee. The major advantage of owning a franchise is that it will initially save you time and money. Over a period of time, you will rely less and less on training and support, but the royalties remain the same.
Putting together the training, proven systems, and marketing is a full-time job for the life of the business. Having someone else take care of those responsibilities lets you focus on building a business.
Is there an advantage to owning a franchise over an independent business regarding success-failure rate?
The data is a bit muddy, but franchises have a better success rate than independently operated businesses. According to the Bureau Of Labor and Statistics, 20% of independent businesses fail in the first year. By the fifth year, half of the new businesses are closed.
In comparison, A five-year study by FranNet reported that 92 percent of their franchise placements were still in business after two years and 85 percent after five years.
The benefit of buying a proven system with ongoing training is a tremendous advantage. And it’s not that franchisees won’t make mistakes that cost time and money. But the success rate of franchisees certainly points to the benefit of training, support, tested best practices, and marketing that works.
Only one franchise comes with a guarantee. Any franchise can fail in the wrong market or when operated recklessly. The is no guarantee that a franchise won’t fail. However, one franchise will refund your franchise fee in total if you follow their system and don’t gross $500,000 in your first 20 months.
For more information on Klappenberger & Son’s $500,000 gross sale guarantee, please get in touch with us at david@klappenbergerandson.com
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Email: dklappenberger@klappenbergerandson.com
Address: 902 Bluff View Dr. Myrtle Beach, SC 29579