Friday, 8 February 2013

Is Franchise really better than Traditional Small Business?

-         3 Executives speak on the advantages of franchising?
Sacramento Business Journal outlined what they considered as the 3 major advantages of franchising as identified by three executives who are experts in this field. These executives identified what they considered as major advantages of franchise business over traditional small businesses. The advantages are:

  1. Established and reputable franchise systems have a proven track record. A strong support system is a major contributor to the franchisees’ overall success and satisfaction.
  2. The likelihood of success. Quality franchisors have proven business models for franchisees to follow. 
  3. They are buying into a proven business model. Their role starts at the implementation stage, not the invention stage

No doubt, every business entry strategy has its own pros and cons, in fact in terms of start-up, franchise seems to have an easier mode of entry, than traditional small business however, franchising business is not as advantageous as they have been presented. In fact, they have similar failure rate as small businesses. Purvin, who is also author of The Franchise Fraud: How to Protect Yourself Before and After You Invest, studied franchise businesses for over 20 years, and he came to the conclusion that  franchised businesses fail at a similar or even higher rate than small businesses. One of the factors responsible for this includes their higher start-up costs and operating expenses to meet brand requirements as well as royalty burdens.
Considering both, buying the franchise of a reputable brand, is not a guarantee for success just as starting up a small business does mean profitability. Franchisees work as much as traditional small business owners in making their businesses a success. Brand recognition, excellent training programs, and outstanding support for their franchisees although good, can never take the place of developing a unique strategy for success. Most franchisees that have relied solely on the support from parent companies, may never satisfy their unique customers. Cari Lyn Vinci, a franchise consultant noted that buying a franchise doesn’t guarantee success; it is only a road map to a destination.
So for franchise experts, giving the impression that franchise businesses are likely to succeed more than traditional small businesses is playing a fast one on entrepreneurs. One thing is sure; very few franchises are as successful as the parent company. Location and other strategic variables play an important role in any business, and not every successful business model can fit into every business location or work with other strategic variables that a franchisee may consider.

1 comment:

  1. Franchising company is one of the best ways to quickly increase in popularity. Franchising business can be profitable especially when it is a company of highly marketable ones.