Franchising’s primary benefit is risk minimization. Starting a new business is risky. Most studies show that over 90 percent fail within three years. The primary reason that the failure rate is so high is because the owners have to go through the learning curve of operating that specific type business. Franchising reduces that curve substantially.
Another reason to buy a franchise is that a franchise investment can be thoroughly researched before any significant expenditures are made. Existing franchisees offer a wealth of information about the business so that new franchisees can try the business on before they buy to make sure it’s a good fit for them.
Franchisers sell a defined, proven business format or method of operation, offering a product or service that has sold successfully. An independent business is based on both an untried idea and operation.
The experience of the franchiser’s management team increases the potential for success. This experience is often conveyed through formal instruction and on-the-job training.
Franchisees can often buy lower-cost goods and supplies through the franchiser, resulting from the group purchasing power of all the franchises.
Established franchisers offer national or regional name recognition. While this may not be true with a new franchiser, the benefit of starting with one is the potential to grow as its business and name recognition grow.
Franchising provides a uniform system of operation, so that consumers receive uniform quality, efficiently and cost-effectively. A uniform system brings with it the advantages of mass purchasing power, brand identification, and customer loyalty, capitalizing on the proven format.
A franchiser also provides management assistance, including accounting procedures, personnel and facility management. An individual with experience in these areas may not be familiar with how to apply them in a new business. The franchiser helps a franchisee overcome this lack of experience.