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Brian's
Introduction
By
Brian Walsh (Founder & CEO of
Entrepreneur.co.za)
Franchising is a very popular choice of industry
throughout the world. Many people prefer the
security and proven track record of franchises.
However, franchising is not for everyone, with
the main stumbling block being the lack of
ability to dictate products and marketing. There
is arguably much less creativity in franchising,
so if you are looking to fulfil your creative
talents, franchising may well not be for you.
Essentially, a franchisee pays an initial fee
and ongoing royalties to a franchisor. In
return, the franchisee gains the use of a
trademark, ongoing support from the franchisor,
and the right to use the franchisor's system of
doing business, and sell its products or
services.
In addition to a well-known brand name, buying a
franchise offers many other advantages that
aren't available to the entrepreneur starting a
business from scratch. Perhaps the most
significant of these is that you get a proven
system of operation and training in how to use
it. New franchisees can avoid a lot of the
mistakes start-up entrepreneurs typically make
because the franchisor has already perfected
daily operations through trial and error.
Reputable franchisors conduct market research
before selling a new outlet, allowing you to
feel greater confidence that there is a demand
for the product or service.
Failing to do adequate market research is one of
the biggest mistakes independent entrepreneurs
typically make; as a franchisee, it's done for
you.
The franchisor also provides you with a clear
picture of the competition, and how to
differentiate yourself from them.
Finally, franchisees enjoy the benefit of
strength in numbers. You'll gain from economics
of scale in buying materials, supplies and
services, such as advertising, as well as in
negotiating for locations and lease terms. By
comparison, independent operators have to
negotiate on their own, usually getting less
favourable terms. Some suppliers won't deal with
new businesses at all, or will reject your
business because your account isn't big enough.
Remember that a franchise is not a partnership
or joint venture between the franchisor and the
franchisee. There is no common ownership of the
business, and neither party is responsible for
the other's debts or liabilities.
A franchise is not an employment relationship -
franchisors pay no salaries and have no direct
responsibility for the franchisee. Most
franchisors believe that franchisees who can
manage and operate independently with a minimal
amount of assistance stand a better chance of
succeeding.
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