We all know that starting a new business is not a child’s play or a decision you make overnight. It takes a while lot of research . First if all you weigh the pros and cons of it. Entrepreneurship is an endeavor that requires an extensive and exhaustive research. Franchise ownership is one acceptable option you may likely consider during your research.
In general, franchises make or sees higher profits than small independently owned businesses. Most franchises have sellable and we’ll known brands that brings customers in millions. This renowned visibility and it’s popularity enhances higher profits
What is a Franchise ?
A franchise can be defined as a legal and commercial relationship between the owner of a company, who is called , the franchisor. The individual who is starting a branch of that business is called the franchisee. The franchisee uses the business’ trademark , logos and business model. The franchisee also sells the product or service that the franchisor supplies. In Nigeria, Chicken Republic is a Franchise fast food company that has above 100 outlets or branches cut across the 36 States in Nigeria and beyond. The franchise industry employs over 50 Thousand people and generates some huge billions monthly.
It sounds interestingly tempting to explore , isn’t it ?
If you are aspiring to be one an entrepreneur , franchising is an interesting opportunity for you. It offers you the chance to be your own boss, you automatically becomes a business owner without taking on the significant risk that comes with startups , that is starting your business from the scratch.
Franchising also offers several advantages for those who want to be business owners.
I will advise the would be – business owners to also go through the disadvantages of franchising before embarking on the journey to buy franchise.
At times buying a franchise can be cheaper than starting a business from a scratch. Nevertheless, franchise still requires a significant monetary investment. It is the reason why you ventured into franchise ownership. Franchise purchase decision cannot be made under durex or impulse. Be mindful of your goals , decisions and stick to it .
Franchising models can provide many benefits for franchisors and franchisees alike. Franchisors can enjoy scaling their business without sacrificing quality or raising outside funds, while franchisees benefit from entering an already proven business model with in-place resources behind it .
To be more elaborate , franchisee is the third-party buyer who purchases the brand rights from the franchisor, who is the owner of the brand. The franchisee pays an initial franchise fee to the franchisor for the rights to use their brand in addition to ongoing franchise fees for marketing, royalties, and more.
For example , Chicken Republic is a Nigerian fast food company and franchise that specializes in chicken recipes, especially fried chicken. It was founded by Deji Akinyanju, and the first restaurant was established in Apapa, Lagos in 2004.
It’s trading in over 150 places in Nigeria and Ghana .
The food company recorded a 73.3 per cent rise in profit before tax to N2.6 billion from N1.5 billion in 2018 and its success stories still counting. .it recently received a tax credit of N723 million, which has boosted their net profit.
THESE ARE FRANCHISE ADVANTAGES.
1. With Franchise buying , existing customer base and brand awareness is guaranteed.
This is one of the reason people go fpr franchise . It comes with an already existing customer base and brand awareness . Brand awareness and customer base building is a tough and difficult task for a new small business.
With a franchise, the target audience is assured , business visibility is already established and active. They already know what to expect, strategies to put in place and decisions to do business. Profit maximization here comes quickly unlike new small business.
The existing brand recognition a
lso makes the recognition of talents or new employees easier.
2. Purchasing a Franchise lowers the risk involved in starting a new business entirely.
3. Support from the franchise owner.
Franchisors provides maximum support and training to franchisees so as to ensure them understand their business model and how the business operates . In addition, their respected years of experience in the business will help you the franchisee build a solid business acumen under their guidance or tutelage. Most times new small business owners do not go for either management or entreprenueral trainings before opening there business.
4. There is amazing opportunities in expanding your business to different franchise locations .
Another merit of buying into a franchise is that you have opportunities for growth and expansion and success within the same franchise..With the embraced successes achieved and easy process over time will birth more new locations while still benefiting from the amazing franchisor’s support. Brand awareness comes to play here and is guaranteed in all the different locations you choose to expand to.
THESE ARE ALSO DISADVANTAGES OF FRANCHISING.
1. Financial information is monopolized and shared with the franchisor alone. It’s only available and shared with the Franchisor.
2. The unlimited creative opportunities is restricted unlike when you start a new small business, your creative prowess or freedom is encouraged and beneficial. When purchasing a Franchise , you only adhere to the the company’s existing rules and regulations. You are not allowed to design your personal unique logos or implement your desired marketing mix. The options are ruled off.
Your freedom is be it in finance or creative is limited with franchise unlike when you are your own boss.
The franchisor being the brain behold the franchise gives all the financial advice when any matter arises . The Franchisee in turn benefits from the advice too..
3. As a new would – be business owner, the startup capital or investments costs can be expensive or capital intensive. These has to do with your business ideas though.
For example, fast-food company Chicken Republic requires a minimum investment # 200 Million Naira of non-borrowed personal resources to be considered. This means the Franchisor expect you to have that much cash on hand that is not from a loan.
4. In Franchise buying , some franchisors may charge rent if you’re purchasing an existing property require you to handle marketing costs, pay management fees, recruitment costs, service fees, and royalties.
5. When buying franchise , there is no permanent contracts deals . You only have to sign a contract that only stipulates a certain time frame for your ownership and it lapses when the franchisor no longer need your in the business. The franchisors sometimes are not reliable and know no empathy , this thereby takes the franchisee back to square one of starting all over again on another business to do.
Conclusion
I will personally advise a franchisee to sign a temporary or short time contract deal for fear of bridge of contract or non renewal agreement by the franchisor.
It’s also a huge achievement , having tapped enough experience that will help start your own business.
When buying a franchise , it gives you opportunity of being a business owner but with minimal or no individual control, no creative freedom and no control of the business either .
Franchisors are also strict with their business regulatory policy .They have controls over holidays , products, Store outlets , opening hours .The rules are out in place so as to promote consistency in all franchisor’s businesses.
In addition, Franchise can also can be a great and less stressful way for would be – business owners to dive into the journey of entrepreneurship, in that everything is soft landing . I tell you , the business model is already put in place for the franchisee. Even though success is not guaranteed. It requires a lot of work for it to be profitable and stand the taste of time
I urge you to give it a trial.
Andrea Okoye
Aka Marketgirlafrica
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