Customer awareness of brand, its products and servicesSpeed Car Wash
Known set-up costs
Based on their experience of operating their own outlets initially and subsequently after other franchisees have joined the network, a franchiser is likely to have a quite accurate estimation of the setup costs of the business. By comparison, independent businesses that do not have the benefit of opening multiple outlets beforehand underestimate the set-up costs and risk compromising on key elements, such as working capital.
Cash flow lending available from some banks
A number of major Australian banks now have a process whereby they are able to establish a risk profile for a franchise brand which may allow the bank to reduce its dependence on traditional bricks and mortar security for a business loan, and instead place greater value on the business’ capacity to generate cash. Cash flow lending in this manner may be as high as 70% of the value of the business.
Access to existing brand and operating systems
A franchisee does not need to reinvent the small business wheel. Investing in a franchise will provide access to a brand that may be well-known and regarded, as well the ‘know-how’ needed to operate that business. Franchiser brand and support can reduce chances of business failure The strength of the brand and the guidance of the franchiser can create a more profound impact in a local market compared to a new independent business. This can help a franchisee achieve a higher level of performance sooner than a comparable independent business, and in the long term, potentially reduce the chances of business failure for the franchisee.
Customer awareness of brand, its products and services
A new franchise may already have a high level of demand for its goods and services as a result of the profile of the brand in adjoining locations. Equally the products or services offered may be unique and distinctive and also have a high level of demand which can provide a franchisee with a running start compared to an independent business owner.
Centrally organised marketing and brand promotions
The franchisor generally provides marketing expertise for the network, and takes responsibility for organizing group-wide marketing and promotional activity. Marketing is a core function of any business and one which many business owners are too busy elsewhere to undertake properly by themselves. Franchising allows this important function to be outsourced to the franchiser.
Franchisee not required to be a marketing expert
In addition to the lack of time a franchisee may have to devote to the marketing of their business, the franchisee is also able to benefit from the knowledge and experience of the franchiser in knowing what marketing and promotions activities will be more effective than others. This means a franchisee does not have to be an expert marketer in their own right, or hire one independently.
Training in the operation of the business provided A franchisee may not need to have previously worked in the field in which they are operating their franchised business as they are trained by the franchiser. Many franchise systems do not require a specific qualification or work background to qualify for the franchise, and consequently a wider range of possibilities is open to a potential franchisee who can be trained in the operation of the business by the franchiser.
Training for the franchisee’s staff Additionally, the franchiser may make training available to the staff of the franchisee, as well as the franchisee themselves. By training a franchisee’s staff, the franchiser can ensure greater consistency of front line customer service standards, and alleviate the franchisee of the burden of conducting their own training.
Franchiser may select site or territory Many people who go into business for themselves for the first time may have little or no experience in the analysis required to identify a viable location or territory. A franchisor is likely to have developed significant experience in this regard over time and be quite proficient compared to an independent newcomer for whom the process may be more miss than hit.
Ongoing advice, guidance and support from franchiser One of the most tangible elements of the franchise offer is the ongoing support, guidance and advice generally provided by a franchiser to the franchisee. This may be a combination of both structured and scheduled support, as well as ad hoc support made available according to a franchisee’s needs. The ability to refer to a senior business partner with “been there, done that” experience is highly valued by franchisees.
Store or territory visits to support franchisees in the field An extension of the support and guidance provided by the franchiser is the in-store or territory field visits by the franchiser’s representative to provide on-site coaching, mentoring and training to a franchisee. Such support is simply not available in such a comprehensive and holistic manner to independent business operators.
Advice and support from fellow franchisees Above and beyond the support of the franchiser is the advice and support provided by fellow franchisees. In joining a franchise network, a new business owner becomes a member of an exclusive group of peers who all operate similar businesses, face similar challenges, and can share and benefit from each other’s solutions. This type of support has many advantages that would otherwise not be available to a non franchised business. Potential often exists to grow beyond one outlet Many franchise networks continue to grow and this can provide opportunities for successful franchisees to continue to expand as business owners into additional outlets or territories, subject to their own capacity and the nature of the business model of the franchise.
Franchiser establishes supply chain for network
An independent business owner must source their own products and services and can spend months or longer to find suppliers, whereas a franchise network has a preexisting supply chain that a franchisee can plug straight into. In many cases, the franchisee does not need to waste valuable time and energy trying to find new suppliers, and can concentrate more quickly on other business priorities. Franchising provides an opportunity for people to more easily get into business for themselves Franchising can help lower the barriers to entry for people seeking to get into business for themselves because of the work done by the franchiser in establishing the system and providing the know-how and training to run the business. The franchisee does not have to re-invent the wheel in the way that an independent business operator would, and can start operating more proficiently more quickly with fewer potential obstacles than an independent operator (and of course, able to access the support of the franchiser during the process).