You should consider buying a franchise where you have a desperate desire to get into business, but you also recognise that you have some weaknesses on your side that can’t easily be addressed in a timely fashion.
These weaknesses may relate to:
- management capability
- marketing experience
- understanding of key systems and processes needed to operate a business
- ability to invest in product development (particularly in industries with rapidly changing technologies).
For instance, I had someone talk to me the other day wanting to buy a business in automation systems. They wanted to focus on the sale of key products, as well as service.
I said: “My concern is that, for the size of business you’re wanting to buy – it was relatively small – how are you going to keep up with the technological advancements in the market to stay ahead of the big players?
“You won’t have scale – or struggle to get it – and therefore how will you be able to fund the R&D necessary to develop new products in this market?
“Without that investment you will always be scrounging around on the fringes, trying to satisfy customers who are constantly being teased by bigger companies with the next big shiny thing, because they can afford to invest millions in development.”
This is one of the benefits a good franchise system can give i.e. scale and ‘bench strength’ around product R&D. Being part of that system could allow you to take advantage of product developments that otherwise may take years to realise as an individual business, or which you may indeed never achieve.
On the other hand…
A good franchise system will allow the individual owner to focus on the things they’re good at, while being supported in their ‘weaker’ areas. Having said that, franchises are definitely not for everyone.
One of the key elements of owning a business is the aspiration to control your own destiny. When you buy into a franchise you sign up to a certain doctrine around how you run your business and how you look after customers i.e. how you represent the franchise’s brand.
Where you believe wholeheartedly in that franchise’s brand and all it stands for, you have a good fit.
However, if you want the freedom to express your own personal and business values through your brand, a franchise may not be ideal for you.
Why not buy an independent business?
In deciding whether or not to buy a franchise, you need to ask: “Am I better to buy an independent business in this sector that doesn’t have the costs of a franchise, or is there some benefit of buying into the franchise?”
The benefits you’d be looking for are:
- marketing and brand strength
- product development and technology strength
- business systems and processes.
If those three things are so much better than the non-franchise option in the sector you’re wanting to enter into – in other words you will get a lot of value from them by owning the franchise – then the answer is it’s probably a good idea.
If they’re not anything special, or the value proposition is such that the cost of being in the franchise outweighs the value you get out of it, you have to question whether the franchise option is worthwhile.
Free resources
If you’re weighing up the pros and cons of buying a franchise, we have some resources that can help:
- Free planning guide: Buying a Franchise Planning Sheet
- YouTube video: Should I buy a franchise?
- YouTube short: What makes a good franchise?
- Infographic: 4 questions to ask when buying a franchise
For support or advice around buying a franchise, or an independent business, contact the team at JPAbusiness on 02 6360 0360 or 02 9893 1803 for a confidential initial discussion.
