Thinking of running a business but wary of the risks involved in starting it up independently? Franchising could be the right option for you, as it offers you the opportunity to work with an established concept instead of coming up with your own business idea. You will be able to take advantage of a tried and tested area by working with an already recognised brand name. Your level of control in running the business will be limited to certain degree. For instance, you will own and operate your own outlet, however your franchisor will retain control over how the products and services are sold. If you have a personal interest in a particular area of business, franchising is an exciting way of making your dream happen.

Franchising explained

Franchising is when the owner of the business (the Franchisor) grants a licence to another person or business (the Franchisee) to use their business idea. In the agreement the licence will be for a fixed duration of time, and will give the franchisee permission to use the franchisor’s name, product, service and association. Therefore you will be making a connection with a recognised brand name, and working to make a return on your investment, using the franchisor’s products and services. The franchisor will already have a successful system in place, and you will be working by the rules of this system.

The advantages associated with Franchising

There are numerous advantages of buying a franchise. They include:

The level of risk associated with investing in the business is reduced substantially. If the other franchises have already been successful, you will be working with a proven idea, and should be making profit faster

The more recognised the brand name is, the more you will benefit from it. Customers prefer to deal with the ‘known’ rather than the ‘unknown’

You will be likely to benefit from the training and support the franchisor will offer you. This will usually include support in setting up the business, instructions on telling you how to run the business, and on-going advice and support

You will be likely to gain financial assistance from banks much more easily. This is due to the fact that banks are more willing to lend money to franchises with a good reputation

There are also some disadvantages associated with franchising. Here are some pointers to think about before you make your final decision:

There is a certain lack of independence associated with franchising. This essentially means that you are not in control of the show, and you may have to adhere to certain restrictions on running the business

The more well-known the franchise is, the more expensive it is likely to be. You will have to be prepared to dig deep into your pockets for this

Depending on how well the franchise is doing, there is an element of risk that it may go out of business

The level of support and training you will receive will vary from business to business. Not every type of franchise will offer the same amount. It will be up to you to investigate this further before you decide to operate the franchise