Franchises offer a ready made business structu
re and model. This suits many people, both experienced business owners and those starting their first business.
A franchise may suit those who are happy to follow the guidelines and are happy to pay franchise fees on an ongoing basis.
If you own a McDonalds franchise, for example, you can't add your own product lines. You sell the products provided. You do things the way you were trained and you follow the manual.
This approach can either provide a support framework or be a limitation, depending on your business approach. If you are an innovator and an ideas person, you may find a franchise somewhat limiting.
Another limitation I've heard from franchisees is that often a one size fits all approach is taken. They say that some of the store products and promotions don't fit their local demographic.
Many franchises have a community involvement element as well, which counteracts this to some extent.
On the other hand the "do it by the manual" approach also reflects one of the strengths of a franchise concept - organize and systemize.
This is exactly why a franchise can often be run very effectively by a manager and a group of 16 year old part time students.
While there are limitations, there are also protections. Prescott Perez-Fox discusses Starbucks' recent closure of US stores for staff training.
It’s also worth noting that Starbucks doesn’t franchise their stores, with the exception of those special location in hospitals, airports, etc.
That helps with a big mandate like this; you’d never see McDonald’s doing this in a million years because it would be money directly out of the pocket of the franchisee.
Do you think everyone is suited to running a franchise?
What are some of the strengths and limitations of a franchise?
Franchises are an outstanding way for a entrepreneur to start a business with a recipe for success. When evaluating a Franchise Concept it is imporant that the aspiring entreprenuer evaluate the UFOC which is financial bible of state of the franchisor. It will tell some critic numbers such as how many opened and how many closed state by state.
Starting a Franchise typically costs more than starting a stand alone business but without the recipe for success. With higher costs it is imporant to understand the success rate of the franchisees as well as the overall health of the franchise itself.
There have been excellent franchises that have not hit critical mass and are not turning a profit. Since most of your support with come from the Franchise it is important to evaluate their financial strength and staying power.
Franchises are an exellent resource for an inspiring entrepreneur but don't forget to look under the hood before you buy.
Posted by: Tom Williams | March 3, 2008 7:34 PM | Permalink to Comment