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Why Franchising is Popular

Why Franchising is Popular

Franchising is a popular business model because it offers several benefits for franchisors and franchisees.

For franchisors, it allows them to expand their business and increase brand recognition without needing large amounts of capital. Franchisors can also benefit from the ongoing royalties and fees paid by franchisees, which can provide a reliable source of income.

For franchisees, it offers the opportunity to start a business with an established brand and proven business model, which can help reduce the risk of failure. Franchisees also receive training and support from the franchisor, which can help them get started and operate the business more effectively.

Franchising also allows both parties to use economies of scale in purchasing, marketing and advertising. This can reduce costs and increase profitability for both the franchisor and franchisee.

Overall, franchising allows entrepreneurs to start a business with the support of an established company, while allowing the franchisor to expand its brand and reach new markets more quickly and efficiently.

What are the benefits of franchising? 

Franchising is a business model in which an individual or group can operate a business using an established company’s branding, products, services and expertise. 

Some of the benefits of franchising are:

  • Franchising offers a lower risk opportunity to start a business since the franchisee uses a proven business model, established brand and tested products or services.
  • Franchisors provide ongoing training and support to franchisees, which can help them run their business more efficiently and effectively.
  • The franchisor often handles marketing and advertising efforts, reducing the costs and time for franchisees to build brand recognition.
  • Lastly, franchisees can benefit from the franchisor’s established reputation, leading to higher customer loyalty and trust.

READ MORE: What are the risks of starting a travel agency franchise?

Why is franchising so popular?

Franchising is a popular business model due to several factors. One reason is that it allows individuals to own and operate a business without starting from scratch, which can be daunting. Additionally, franchising provides access to a proven business model and support system, which can benefit those lacking business experience.

How have attitudes toward entrepreneurship changed?

In the past, entrepreneurship was purely for those people who were prepared and were able to invest large sums of money, work around the clock and afford to pay people to support them with all the admin and marketing roles that running your own business entails. It was considered a ‘risky business’. Today, much of that has changed, thanks to franchising and technological advances, enabling entrepreneurs to handle many of the creative, marketing and admin tasks themselves, at a fraction of the cost and with far less effort and knowledge. In essence, it’s become easier to start a business, with lower startup costs and greater access to resources. As a result, more people consider entrepreneurship a viable career option.

Success stories of franchises 

As discussed, one benefit of running a franchise is the speed at which you can be up and running. Instead of spending time building your reputation, creating marketing materials and developing all your systems, you can jump straight in and scale up fast.

While 83% of franchises are food and beverage, there has been a notable rise of niche franchises which often do not need a huge investment. One such area is travel with one of the UK’s fastest franchises being The Travel Franchise. In the first 10 weeks of 2023 it welcomed over 51 new franchisees while many existing franchisees reported record growth. The franchise is known for training people to become home-based travel agents and 98% of people are completely new to travel. Some start part-time and then quit their jobs to become full-time home-based agents.

Only 16 weeks after launching his travel business, Ben Casey had experienced such incredible success that he handed in his notice as a Divisional Marketing Manager to concentrate on running his travel franchise. He loves the lifestyle benefits and flexibility of running his own business. Click here to read more real life success stories.

Why is a franchise less likely to fail?

Research has shown that franchises have a higher success rate than other small businesses. According to a study by the International Franchise Association, over 90% of franchises are still in business after five years, compared to only 15% of independent businesses. 

One reason for the high success rate is that franchises have an established brand and reputation, which attracts customers and builds trust. Franchisees benefit from the marketing and advertising efforts of the franchisor, leading to higher sales and customer loyalty.

Another reason is the training and support provided by the franchisor. Franchisors typically offer comprehensive training programmes covering everything from operations to marketing, helping franchisees operate their business more efficiently and effectively.

Franchisors frequently provide ongoing support to franchisees through field, marketing and operational support. This continuing support is a valuable resource designed to help franchisees grow in confidence, overcome challenges and adapt to a rapidly changing market. 

To summarise, the success of a franchise can be attributed to the established brand and reputation, the comprehensive training provided by the franchisor and the ongoing support provided to franchisees.

What does the research on the success rates of franchises show?

Research on the success rates of franchises has shown that they tend to be more successful than independent businesses. According to the Franchise Association’s report, over 90% of franchisees in the UK reported profitability in the past year, compared to 65% of independent businesses. In addition, the failure rate for franchises is significantly lower than for independent companies.

What is the reason for these high success rates?

There are several reasons why franchises tend to have high success rates. Firstly, the franchisee benefits from the established brand name, which attracts customers more efficiently than an unknown independent business. 

Secondly, the franchisee receives training and support from the franchisor. This helps to avoid common mistakes and assists with running the business more effectively. Finally, the franchisor provides ongoing marketing, product development and business management support.

What support is provided by franchisors?

Franchisors offer a range of support services to franchisees, which can vary depending on the type of business. For example, they may provide initial training to help the franchisee get started and ongoing training to keep them up to date with new products, services and business practices. They may also offer marketing and advertising support.

If you are considering investing in a franchise, it’s important to research the range of support services franchisors offer. For example, The Travel Franchise provides every franchisee access to a business development manager who they can contact when they require help. It also provides weekly training and luxury mentorship retreats abroad led by its co-founders and a range of travel experts. 

What’s more, each franchisee gets his or her own customisable website and is even supplied with daily social media posts that they can upload onto their own social platforms. 

Why is franchising good

Benefits of franchising for franchisors

Franchising can be beneficial for franchisors in several ways. Firstly, franchising allows them to expand their brand and business without significant capital investment. Franchisors can use the franchisee’s capital to fund business growth.

Franchisors benefit from the franchisee’s local knowledge and expertise. Franchisees each have knowledge of their local areas and an already established network of potential customers, meaning the franchisor can focus on fine tuning the product while allowing the franchisee to do the selling. 

Benefits of franchising for franchisees

Franchising offers numerous advantages for franchisees. 

Franchisees can benefit from an established business model and brand, reducing the risk of starting a new business. They also gain from the franchisor’s marketing and advertising efforts, which builds brand recognition and attracts customers.

A reputable franchisor should always provide continuing support for its members, helping them run the business more efficiently and effectively. This support can include training, marketing, product development and business management assistance.

The franchisor’s established reputation leads to higher customer loyalty and trust, which can be crucial for the success of a new business.

Benefits of franchising for the economy

Franchising can benefit the economy in several ways. 

The franchise model creates jobs and stimulates economic growth. Franchisors often require franchisees to hire staff to run their businesses, which offers new employment opportunities.

Franchising also contributes to small business growth. By providing a proven business model and support system, franchisors can help increase small businesses’ success rates, leading to more economic growth.

Lastly, franchising encourages entrepreneurship. Franchising offers a lower-risk opportunity for individuals to start a business, encouraging more people to become entrepreneurs. This leads to more market innovation and competition, ultimately benefiting consumers.

Franchising vs independent business ownership

Franchising and independent business ownership are two popular ways of starting a new business.

Franchising involves operating a business using an already-established company’s branding, products and services, while independent business ownership consists of starting a business entirely from scratch. 

Franchising offers numerous advantages over starting a business from nothing. The franchisee benefits from a robust brand name, which helps draw in customers more efficiently than an unknown independent business. Also, the franchisee receives training and guidance from the franchisor, helping them avoid common mistakes and steer the company toward success. 

Another benefit offered by a franchise is robust support that’s ongoing and covers topics such as marketing, product development and business management.

Comparison of the benefits and challenges of franchising

Franchising and independent business ownership each have their benefits and challenges. 

Franchising offers a lower-risk opportunity to start a business, as the franchisee uses a proven business model and an already-established brand. Additionally, the franchisee gains from ongoing support provided by the franchisor. However, franchisees may be limited in creativity and innovation, as they must adhere to the franchisor’s established business practices.

Conversely, independent business ownership offers complete freedom and flexibility. The owner can create their unique brand and business model and has full control over the business. However, independent businesses face higher risks, as they lack a franchisor’s support, resources, experience and knowledge.

Comparison of the benefits and challenges of starting an independent business

An independent business offers freedom and flexibility to the owner. They can create their unique brand and business model and ultimately control the company. However, independent businesses may face higher risks as they lack the backing of a franchisor. Independent business owners must also invest time and money into building their brand and establishing their business practices.

Why is franchising a better option for some entrepreneurs?

Franchising is an excellent option for many entrepreneurs who want a lower-risk opportunity to start a business. A franchise membership provides considerable advantages to any entrepreneur by offering a recognised name and a proven strategic model.

A growing number of entrepreneurs are choosing to join a franchise and increase their chances of success, especially if they have yet to gain experience in the business world. The franchisor provides training and support in, for example, product development, business management and marketing.

Conclusion: The popularity of the franchise business model

The franchise business model has become increasingly popular in recent years, with more and more entrepreneurs choosing to start a business this way. Several reasons exist, including the lower risk associated with franchising, the franchisor’s established brand and business model and the ongoing support and resources available to franchisees.

Franchising offers a range of benefits to both parties. Franchisees enjoy an established brand name, continuing support and training and economies of scale when purchasing goods or services. At the same time, franchisors gain from expanding their business and the financial reward that it brings.

While franchising does have its challenges, such as limited creativity and innovation for franchisees and the need for franchisors to maintain brand consistency, the benefits of the model continue to attract entrepreneurs.

Overall, the popularity of the franchise business model is predicted to grow even further, as it offers a lower-risk, proven path to business ownership for those who may lack business experience or resources.

The key therefore for franchisees is to choose the franchisor very carefully. Take the time to research the company and look at how its existing franchisees are performing, such as Ben Casey’s success story with The Travel Franchise

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