AN INDEPENDENT STREAK
Keen to run your own business but not sure if you are ready for an independent venture or a franchise? Inside Franchise Business investigates the positives and negatives of each option to help you make a more informed decision.
Should you buy a franchise or an independent business? Check out these advice tips.
Do you like things done your own way, or do you prefer ongoing help and guidance? The answer to that will help determine whether you would find franchising frustrating or challenging.
From an ownership perspective, running a typical small business is far different to running a franchise. Independent business owners have the freedom to change their products and services based on personal preferences. This is not so for franchise owners, with franchisors generally making decisions about products and other measures.
However, independent owners do not have the security of knowing that products, services and systems have all been tried and tested. Franchisee Bev Taylor from courier company InXpress says the beauty of a franchise is that there is a model that works. “Follow the model – I am the biggest advocate of that,” she says.
While independent business owners are likely to have higher investment costs, they have more control over investment decisions. If cash is tight, they can delay plans or choose to downsize projects.
On the other hand, says advisory service BDA director Mark Fernandez, a franchisor and their group collectively can buy supplies and services cheaper than an independent business.
“It is about the number of widgets. There is also the group marketing fund, and that pool of money is generally more than you would have on your own,” he says.
“The franchisor usually employs someone to look after marketing, market trends, innovation and marketing initiatives, where a business owner usually needs to do this themselves on top of networking and bringing in business.”
STRESS AND RISK
Despite the many positives of owning an independent business, it comes with a high degree of stress and risk. Doing things on your own means you need to trial marketing or product initiatives yourself, and you do not have the benefit of the constant support and help available in a franchise network.
An existing brand, tried-and-tested systems, an experienced head office and a network of ongoing support are just some of the benefits of a franchise.
Brand awareness can have a big impact on a new business, so buying an established business, be it independent or a franchise, means you'll be trading from the get-go. You will not have to spend time and resources convincing customers to try something new, which is a significant challenge for new business owners.
There will not be systems in place, however, or ongoing support for an established independent business, which again makes a franchise such an appealing option.
“It’s all about the brand,” says Fernandez. “People turn to recognised brands, and franchisees look for the systems and processes under that umbrella.”
Having an existing brand means there is a head office with experienced staff members ready to offer the right business advice.
Even if not a household name or even established nationally, a franchise will have multiple outlets so there is some brand equity in the community. Buying a franchise rather than an independent business can also mean a faster return on investment because of the support and structure provided. This can often provide a competitive edge.
A 2016 report from Griffith University says sales turnover for the franchise sector was estimated at $146 billion,
while IbisWorld identifies three key success factors for franchising:
• Having a loyal customer base
• Having a clear market position • Having the combined business expertise of the group.
A franchise makes it possible for people who have never been in business before to run one successfully. A major benefit of being part of a franchise is the support available, from training to ongoing business development and benchmarking.
Opportunities for specialised learning or training is another tool in the arsenal for the development and profitability of a franchisee.
LEARNING FROM OTHERS
Taylor says it is really important that franchisees have a group of colleagues they can visit and learn from.
“Before you consider going into franchising, visit established franchisees. Ask to meet with those who are successful and those who were not,” she says.
“Speaking to other franchisees is a really great aspect of owning a franchise. There is the opportunity to discuss and learn from others in the same position as you,” says Taylor.
To uphold the reliability of their brand, franchisors work out nearly every detail for how the business should be run for peak performance. Franchisees are expected to follow the franchisor’s direction on most aspects of the product or service offered, marketing direction, and quite often which suppliers are used. However, franchisees make management decisions on the kind of culture they want and decide who they will hire.
Depending on your abilities and goals, this could be exactly what you need to start a business. If you don’t have much experience with business but would like to own one, then this could be the most beneficial model for you.
NO CLEAR ANSWER
So which model is better? There is no clear answer or data that proposes either model as more likely to succeed. And, in terms of costs there are too many variables to provide a clear answer.
What is clear, however, is that business success is highly dependent on the attitude and commitment of the owner. It is the same in franchising.
The decision to pick a franchise above an independent business is really personal. It pays to consider what is expected of a franchisee and whether it is in your nature to be compliant and follow tried-and-tested practice, or whether your independent streak will out and you’ll be reinventing the wheel at every opportunity – not the best place to be as a franchisee.
The only way to really decide which model will work best for you is to make sure you have researched all angles and have spoken with both independent business owners and franchisees.
“Learn everything you can about the franchises,” says Taylor. Do not research just the positives but also the negatives.
Taylor says her experience as a franchisee has been incredibly rewarding, but not without hurdles.
“It is important to look at your life and priorities and know what it will entail to be a franchisee or an independent business owner. Owning a small business can be a great experience with either model, and it is important you speak with experts and research as much as you can before making a decision.”