Today franchising is an opportunity for an individual to own his or her own business, even if he or she is inexperienced and sometime includes those that are without adequate capital. Franchising has been expanding rapidly in the last 2 decades, and continually enters into new areas of application. There are grooming franchise opportunities. The most recent industry study estimates that franchised businesses (all types, not just grooming) accounted for nearly $1 trillion in annual sales recently. More than 10 million people are employed by franchise establishments.
Franchising is a form of licensing by which the owner (the franchisor) of a product, service or method obtains distribution through affiliated dealers (the franchisees). The holder of the right is often given exclusive access to a defined geographical area. The product, method or service being marketed is identified by a brand name, and the franchisor maintains control over the marketing methods employed, or assists the franchisee in the operation of the business. In many cases, the operation resembles that of a large chain with trademarks, uniform symbols, equipment, storefronts and standardized services or products.
The franchisor maintains uniform practices as outlined in the franchise agreement. The International Franchise Association, the major trade association in the field, defines franchising as “a continuing relationship in which the franchisor provides a licensed privilege to do business, plus assistance in organizing, training, merchandising and management, in return for a consideration from the franchisee.”
What are the Benefits of Buying a Franchise?
The primary purpose of a franchise is to minimize risk in starting a new business. Studies of franchising stand behind this assessment. Starting up a new business is risky. Most studies show that over 90% fail within three years. The primary reason that the failure rate is so high is because the owners have to go through the learning curve of operating that specific type business. Unfortunately, the market place is not very tolerant of the inexperienced neophyte trying to learn how to operate a new business.
If you can’t compete in the market place, your business performance can hurt your personal and business finances, even severely. Franchising can reduce this risk with its many advantages.
Studies indicate that franchise new business startups rarely fail and when they do it is typically because the franchisee did not stick to the franchisers systems. In all human endeavor there is involved a learning process . This learning process requires going through a series of trial and error encounters wherein knowledge is gained by trying and failing, trying and failing again and again and eventually trying and succeeding.
This process is generally called the learning curve. In the context of franchising, the franchiser has already gone through the learning curve and has learned the secrets of success for the specific business. In business format franchising all that has been learned by going through the curve is transferred to the franchisee. This is fundamentally why you buy a franchise, to minimize risk and give yourself the best possible chance to succeed.
With a new business startup that is not a franchise you may be operating in the dark. This is why we have recommended a formal grooming business plan, yes even for small grooming shops. Franchisors often provide a lot of information similar or much the same as a business plan to their franchisees, and that allow the franchisee to research their potential before they invest heavily into their new business. No matter how much research you do it is very difficult to get a handle on so many aspects of the new business. With a franchise the franchisor is a wealth of information about the business from how to prepare a pro forma to the best personality traits for the business. But the most important information comes from the existing franchisees.
With a good systematic approach you can get answers to nearly all the really key questions. You want to ask questions such as, “Do you feel I am adequately trained to groom and operate this business?” “How long before I can expect to break even, and what is the annual return on investment?” Think of a franchise as the opportunity to try on the business to make sure it fits you. Study your franchise and take advantage of being able to ask the experienced franchisor all of your questions. If you will require financing to purchase your franchise you may financial institutions more open to making the loan when you buy a well-known franchise.
In summary the primary reason you should buy a franchise as opposed to starting up a non-franchise new business, is to minimize risk and enhance your chances of success. ♦