Essay Sample on Franchising

Is it better to start with a franchise or create your own business, and why is one better than the other? A lot of people are asking themself this question; often a person would start thinking about it when having worked a 9-5 for a long time, when tired of having someone bossing you around, or when that same person believes that his ideas are worth trying to develop his own business. But why would choose one over the other, and which one makes the most sense to start with? Let’s start by establishing what is a franchise and what it means to create a business. A franchise is when a business owner decides that he wants to expand and develop his business idea in some other parts of the world. He can do it alone but he can also decide to create a franchise, which means that he will be selling the right to use the name and idea of the brand but will still own the brand. A franchisee takes his own decisions but has to respect the business model of the already existing brand. 

Creating a business on the other hand is totally different, doing this means starting something from scratch, coming up with an idea that has never been tried before, or thinking that the product created will be better than what has already been done. You will have to come up with the idea, the name of the brand, the business model, and much more. 

Issue 1:

Leaving a company to start a business or take a franchise can be nerve-racking, but there are plenty of ways to find which one will be the best fit. In this paper, we will be going over 6 main points and comparing how they differ between someone who started his own business and someone who took a franchise. 

Owning a franchise gives the best from both sides but also has drawbacks, being a franchise makes the person owning the franchise his own boss, it gives him the opportunity to manage the business as he want and have the planning he wants but with goals to reach. It gives the opportunity to have the franchisor behind your back to help and guide a new franchise. The franchisor is here to make sure the job is done and that the monthly goals are hit. "Owning a franchise allows you to go into business for yourself, but not by yourself."  When owning a franchise the franchisor is not the one in contact with the personnel and the day-to-day operations, the franchisee is. The franchisor does not have to be taking care of the personnel or the everyday work of working in the franchise. “The franchisor will not be involved in the day-to-day operations of each franchised outlet.” When taking a franchise the brand is already existing and the brand already has the providers or manufactures (factories) to build their own products. They also already have their own strategies to make the business work or how the business should be run. The franchisor already has all this and doesn’t have to start from scratch he has to develop the idea in the chosen area. ”A franchise provides entrepreneurs with a ready-made business that already has processes, procedures, strategies, and branding in place.” Furthermore, the Company has already tested the products and already knows what products work or do not work and in which market they work the best and at what time of the year they work the best. The company also knows in what part of the world their products works the best and will attract the most clients “don't have to go through the whole process of testing your product to see if there's a market for it”

A franchisee doesn’t have the ownership of the brand but is the owner of the store he owns under the franchise. He makes decisions for his franchise but not for all the other franchises and franchisees. As said in “you control your franchise unit in terms of the culture and values you set, and who you hire and fire, but you must follow the franchisor’s operating system.” The person buying a franchise is buying a business that is already established in some part of the country or world. The brand is already here and already has proven to be successful in some parts of the world and has already done some advertising to get known by the general public.“A franchise provides entrepreneurs with the opportunity to buy an established business with branding and processes in place.”

Issue 2:

When buying  a franchise the brand is already existing and already had time to advertise the products that it is selling or offering. When buying a franchise the franchisee doesn’t have to worry about marketing because the franchisor already took care of it. When creating a business and starting a business from scratch you have to take care of advertising and how get in touch with the right people to get them to buy from you  The new business doesn’t have the brand recognition an established franchise has, the franchise has already done marketing and advertising, ”In most cases, franchise buyers have an advantage over independent business owners when it comes to brand recognition.” When deciding what to start with it is easier to start with a franchise that is already known in some part of the country or even the world. Some people already know the brand and already bought from the brand in different parts of the country, which makes it easier to start a customer database. It also helps reassuring the clients that the brand is not a scam or is not selling products that will break two month after buying them. The company also already tried the products that work and don’t work and which of the sell more, there is no need to go through the testing phase when taking a franchise, ”an established franchise that has built a reputation of providing the best products or services means entering the market with an advantage. There's less trial and error versus if you were to start your own company.” Another major point that is often forgotten is the business that sells products/goods to other companies will have more trust in a bigger business rather than a newer/smaller business that hasnt proven to be successful. They know they will possibly be able to do long term business with the big business and maybe not with the small one.“having the power of a recognized brand behind you often eases the mind of a supplier in extending credit: if a successful franchisor is willing to trust you, vendors are more likely to do so as well.”

Issue 3: 

When creating a business everythingwill have to be built from the ground up, but when buying a franchise help from the franchisor to start the business, they might helpwith the cost of the work needed to open a new store or even help pay rent in the first few months. Help from other franchisees will also be available as when there is multiple franchise of the same brand in one country there will be a network to connect all the franchisees together.  “Independent business owners are likely to have higher investment costs to buy and operate their business, but they also have more control over the investment decisions and timing thereof.”

When owning a franchise the costs that the franchisee has to pay will often be due to the franchisor. A franchisee buys the products that his brand sells directly from the franchisor, when selling a product depending on the contract with the franchisor the franchisee will have to give a certain amount of the money made while selling the product back to the franchisor. However the franchisor is not responsible for money due to the landlord, the franchisee will be the one taking care of the cost associated to that.“These costs exist for both franchisees and small business owners. However, for franchisees, these costs often come in the form of fees.” On the side of the franchisor, he will need less money (capital) to open stores as he is not the one opening them, the franchisees will be the one opening the stores and paying the employees. The franchisees will be finding and opening the locations for the stores with sometimes the franchisor supervising it.  “The franchisor’s capital requirements will be lower because the franchisees provide the capital to open each franchised outlet.”

Issue 4:

Moving on to another subject some franchisors will have special training week where employees from different part of the world go to the headquarters to receive training, the franchisor will also sometimes send one of their experienced vendors or trainors to a new store to train the new vendors and the new franchisees and explain to the new vendors how to utilize the resources that the brand has for their best interest  “While most franchisors conduct initial training at their headquarters, frequently they may have alternative training facilities.” Furthermore the franchisor usually provides some kind of homework or website to learn about the brand and learn the products and how they should introduce the products to the clients.“Initial training often includes a combination of coursework and on-the-job training.”The franchisor usually has a team (ofen located at the head quarters) to help the franchisees, this team is here to solve problems that may occur with some of the logistics or provide help and answer to specific questions if needed. As an example if a problem occurs with the delivery of the products at the warehouse of the franchisee, the franchisee will have to contact tis specific team to know where the container is located, why it is late, and if they have an estimation on when it will arrive at the warehouse. Another example is that if products arrive damaged from the container the franchisee will also have to contact this team to know if they will be able to replace the product or not.  “A franchisee has an entire network of professionals and fellow franchisees to lean on and to help solve problems, as well as a robust structure in place to specifically help them succeed."