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Franchising Vs Small Business Opportunities

By: Guest Article - Updated: 12 Jun 2013 | comments*Discuss
 
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The decision to open a business is one of the biggest choices a person can make in their lifetime. The risks are many, and they go far beyond the great financial investment involved in opening a small business. Inevitably, you'll put all of yourself into a business and owning a business involves such a serious commitment of one's time and energy that the health of one's personal and family life can often hinge on the relative success of the organisation. And the odds are almost against you: a recent study from America's Small Business Administration claims that over 50% of new small businesses in the US fails. For every thriving business concept there is a storefront with shunted-up windows and a ''Closed'' sign stuck on the window.

And yet, the allure of owning a business continues to rise. The ascent up the corporate ladder, for all of its monetary rewards, simply cannot match the entrepreneurial empowerment that comes from being one's own boss. For those determined to own their own business, there are two common routes: either open an independently-run small business or purchase a franchise. Whichever direction you take, it helps to know the pro's and con's before deciding.

Understanding How Franchises Work

While much has been written about the nuts and bolts of starting a business, perhaps less in known about franchising and how it works. This is slightly strange because franchises are everywhere we look when we drive through our town or village. McDonald's. Subway. Wimpy's (to use a British example), and this only to name three of the biggest franchise brands around. At this stage, nearly every kind of business in Britain has been franchised. There are unique strengths, as well as a few disadvantages, that an entrepreneur needs to weigh up before investing in a franchise.

The secret of franchising is explained in one simple phrase: 'work for yourself, but not buy yourself'. Franchising is essentially business ownership with an acknowledged compromise. The franchise owner, known as the franchisee, after selecting a franchise concept that is tailored to their experience, acumen and financial portfolio, will manage all of the day-to-day decisions of the business. He or she will hire and train staff and be at the coal face of the business, with a critical responsibility for managing the way customers interact with the business. Behind the scenes, most of the macro decisions for the business - things pertaining to the look and feel of the store and the pricing of products - will be made from the corporate office.

As you can imagine, franchising is business freedom with limits. It has been said that a true maverick is not suited to franchising and the ideal franchisee is someone who can think independently while remaining loyal to a larger system (this partly explains why so many military veterans in the UK and the US have turned to franchising). Of course, there are great benefits to a partnering with a well-established franchise brand. Compared with an unknown entrepreneur launching a start-up on a shoestring budget, a franchisee will benefit greatly from the brand power of an established national franchise. A popular, proven name can make all of the difference for a new business during the choppy waters of its first months in existence. Yet such brand power does not come for free. Each franchisee must pay a large fee to the franchisor upon the purchase of a franchise, as well a monthly percentage of their profits.

Franchising within Great Britain

What cannot be doubted is the economic pull of franchising in Great Britain. According to stats provided by the British Franchise Association, the UK's franchised business reap over £12.4billion in turnover every year. There are about 900 franchise concepts - of which 90% are profitable - operating in Britain which employs more than 521,000 people. Franchising has become a major plank of the British economy as it looks to mount a revival, and economists believe franchising will create 500,000 jobs in the next five years. The franchise opportunities on offer are not just limited to fast-food restaurants. Cleaning, health-care and pet businesses are a just a sample of some emerging new franchise categories.

While franchising does not provide outright independence for business owners, it remains a pragmatic (and largely profitable) entrepreneurial option. If you crave a new challenge in your career, a franchise might be the perfect small business for you.

About the Author

This was a guest blog written by Donald Cranford, editor at Franchise Direct.

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