Without doubt, the biggest advantage to a franchisee is that it reduces the risk of business failure. Because an ethical franchisor will have tried, tested and proven the business model, most of the challenges will have been overcome, and risks to the franchisee minimised. It is a well published fact that less than 7% of franchisees fail within the first 3 years, as compared to over 90% of independent new business start ups.
Franchising enables small independent businesses to compete with larger corporate business. By taking advantage of economies of scale, franchisees acting together can buy more cheaply and on better terms than can an individual small business. When complemented by the franchisor’s support package, franchisees should have a distinct advantage over any small independent competitor. It also enables a franchisee to trade under a recognised brand.
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“ Franchisees are more likely to “hit the ground running” when they open their franchised business, as they are entering their market with a recognised brand name, proven business model and products or services which have been tested in the marketplace ”
Jason Simpson
AlphaGraphics UK
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Training provided by the franchisor enables the franchisee to climb a very steep learning curve very quickly, considerable increasing his chances of success. No previous experience in a particular business is necessary for a franchisee to operate it, as any gaps in knowledge are dealt with through training or ongoing support from the franchisor.
Franchisees are more likely to “hit the ground running” when they open their franchised business, as they are entering their market with a recognised brand name, proven business model and products or services which have been tested in the marketplace.
The main benefits of franchising are:
· Reduction in risk, tried and tested formula
· Marketing, advertising and public relations support
· Predetermined marketing, production and administration package, clearly defined in writing. “The operating manual”
· Preferential finance packages
· Ongoing support and advice
Marketing & Advertising
By each contributing a little, Franchisees have the benefit of a large fund for marketing and advertising purposes. This is achieved by the pooling of resources. Franchisees are therefore able to have their goods and services promoted through media which would more than likely be closed to small, independent competitors. In a well-run and structured franchise the franchisee is able to concentrate on selling their goods or services while at the same time receiving the benefit of continuous market research and development to improve the business and the franchised system.
Predetermined marketing, production and administration package
The franchisee has the benefit of the management and administrative experience of the franchisor in addition to which most franchisors provide back up and support including trouble shooting services to assist franchisees in their daily endeavours. This support normally includes managerial and administrative services, product information and marketing support. All such information is usually documented in the ‘Operating Manual’ and forms the basis for initial training and ongoing implementation of the business model. This limits the amount of experiential learning needed and provides a shortcut to running an efficient and effective business.
Preferential Finance Packages
For all the reasons outlined above, the banks like franchising. Because a franchisee has the benefit of a proven business format behind them, and projections which are normally based on reality and experience, banks are more likely to look favourably at such a proposition
Due to the reduced risk of business failure, the main banks are not only more attracted to funding franchise start ups, but are normally prepared to lend to a greater ratio than they would for a independent business start up. Typically the major banks will lend up to 70% of the total funding requirement, based on adequate security of course. This is significantly higher than what they are normally prepared to lend against the funding plans of an independent start up.
Ongoing Support and Advice
Training and ongoing support doesn't end when your franchised business starts trading. Ethical franchises provide ongoing training throughout the year via regional seminars; audio, video, Web and computer-based instruction and one-on-one, on-site visits from trained and experienced field consultants.
In addition, many franchises will have a private intranet site, providing a database of FAQs, manuals, advertising materials, technical updates, best practice and much more.
Jason Simpson - Managing Director
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Tel: 01904 717 824
E-Mail: j.simpson@alphagraphics.co.uk
Website: www.alphagraphics.co.uk
