As announced in the last article, today’s topic is the founding of a franchise. When looking for a start-up idea, the question often arises as to why one should reinvent the wheel. Even away from McDonalds, McFit or Blume 2000, there are small franchisors who have really cool business ideas to offer. But how does the franchise actually work? Let’s summarise:
Basically, the franchise system is a business method in which a company (called the franchisor) grants other companies or individuals (called franchisees) the right to use its business model, brand and operations for a fee. If you become a franchisee, you run your own business, but under the brand and according to the franchisor’s specifications. This has advantages and disadvantages.
What is the good thing about starting a franchise?
One advantage, for example, is that you benefit from the brand’s awareness and reputation as well as from the franchisor’s experience and support. The fact is that a franchise system includes a comprehensive concept for the management of the business, including operations, marketing strategies, product range and image. So you get a whole package, which also includes training and general support. After all, it is in the franchisor’s interest that everything is implemented correctly and that the shop runs smoothly.
Are there any disadvantages?
Yes, there are. Above all, the costs for franchise systems are usually quite high. In plain language, this means that the business has to run as fast as possible. Another point: If you live in a larger city, you may be competing with other franchisees. Many donors get around this problem by only allowing one franchisee at a time for a set radius. The biggest disadvantage for many, however, is the lack of entrepreneurial flexibility. As a franchisee you are bound by rules, you cannot act freely. You move within a fixed framework. This means that if you open a Blume 2000 store, you cannot start selling additional clothes there.
How do I find a suitable franchisor?
We have summarised a few clues for you:
#1 Research on the internet: An easy way to find potential franchisors is to search the internet. Many franchisors have informative websites that provide an overview of their business, their concept and the conditions for working with franchisees. Search for terms like “franchisor” or “franchise systems” in your favourite search engine.
#2 Visit franchise fairs: Franchise fairs are a good opportunity to meet potential franchisors and gather information about their systems. At these fairs, various franchisors present themselves and offer detailed information about their business concept and cooperation with franchisees.
#3 Contacts and referrals: You can also make contacts in the industry or get referrals from other successful franchisees. Networking events or business events can help you make contacts and exchange information.
#4 Franchise advisors: There are also specialised advisors who can help find a suitable franchise system. These advisors have extensive knowledge of different franchisors and their systems and can help you choose the right system.
Once you have found a potential franchisor, you should take a close look at their system, concept and conditions. Exchange with other franchisees is also an important point and definitely get advice before you make a final decision.