The Coronavirus outbreak has caused massive disruption in the retail industry. Significant layoffs have become commonplace and the situation is a far cry from the rosy projections of expansion, growth, and scaling operations for many businesses. As companies come to terms with the implications of current economic challenges, including potential market closures, the question of what’s next is being asked amongst layoffs.
Franchising is often seen as a viable option to re-enter the world of entrepreneurship. It offers the perfect opportunity for those laid off to build their own business without the hassle of managing a large number of daily operations. But is franchising the right move for those looking for a new venture?
The International Franchise Professionals Group (IFPG) tackles this question and more with an exhaustive list of Frequently Asked Questions (FAQ) for those interested in starting a franchise. We cover the benefits and challenges of franchising and provide the support and resources needed to make sound business decisions. Whether a person is looking to purchase a franchise or want to franchise their existing business, the IFPG takes a collaborative approach to help individuals make the best decision for their specific circumstances.
What is a Franchise?
In a nutshell, franchising is a business model that allows a franchisor to license their business and its associated trademarks, logos, and systems to an independent operator. The franchisee pays a one-time franchise fee, and royalty payments based on a % of their sales. The franchisor typically provides operational support, training, and marketing services.
The franchisor and franchisee form a contractual relationship where the former grants the latter the right to use their business system and sell their goods and/or services. The franchisee agrees to operate the business in a manner consistent with the brand and standards of the franchisor.
What are the Benefits of Franchising?
Franchising offers a number of distinct advantages to the franchisee, including access to a proven business system, a team of experts for continuous support, and a personalized marketing plan. This makes it an ideal option for those wanting to own their own business without having to start from scratch.
Another key benefit is that with franchising, the business is already established and the franchisee receives a turnkey business model that is easy to operate and requires a minimal amount of startup capital. This significantly reduces the amount of time, energy, and trial and error necessary to kickstart a successful business.
What are the Challenges of Franchising?
Like any other business model, franchising comes with its own set of challenges. One key challenge is that the franchisee is limited to the franchisor’s business system and brand. The franchisor controls the product, branding, pricing, and operational decisions. This means franchisees may not be able to make decisions regarding crucial business elements.
Another challenge is the financial aspect. While franchising does require a minimal startup capital, a franchisee needs to pay the franchisor in the form of royalty and other fees. There is also the issue of finding the right franchise investment as well as financing it.
Is Franchising Right For Me?
The answer to this question depends on the individual and their unique circumstances. Before investing in a franchise, one should ask themselves a series of questions in order to assess the viability and success of the business. These questions include: Do I have the necessary skills and experience to manage a business? Do I have the financial resources to invest in a franchise? What are the risks and rewards associated with this type of business?
At the IFPG, we provide franchise brokers to assist franchisees in every step of the franchising process. Our experts provide consultations, strategies, and tools to help the prospective franchisee find the right investment that meets their needs. By leveraging the collective experience and knowledge of our franchise broker network, IFPG’s members can make sound decisions and secure a smooth transition into the world of franchising.