A bold question to ask, you might say. Certainly one to stir things up with those ‘entrepreneurs’ who are currently franchisees.
However, setting controversy aside, it is a question that I have often pondered when looking at why people select the franchise route when setting up their own business. I can certainly understand the attraction of a franchise; for some people with a lack of confidence in their own abilities to set up a business on their own from scratch, a franchise provides a shortcut together with a proven business template that works. Some might say that it removes a lot of the guesswork when setting up your own business, as the groundwork and foundations have already been laid.
I would just like to challenge that for a moment. The perception is that you’re buying into something that already works, but is that really true? What is it that makes a business succeed? Is there such a thing as a fail-proof business? Does this mean that literally anyone can set up in business following a franchise model and succeed? Do franchisees stand a better chance at success than someone setting up an independent business?
Questions, questions! Well, firstly let’s do some research and try to understand what makes a business successful. I will refer to one particular source due to the number of sources that Moyak K. Mason also refers to when trying to understand what makes a business succeed or fail. Suffice to say, that research conducted for the paper, ‘What Causes Small Businesses to Prosper?’ points to evidence that suggests that success or failure does not come down to management tools or techniques. Moreover, a strong understanding and grasp of business basics is more likely to establish a successful foundation for your business than any system. At the end of the day, a system is just a system that can be followed or not followed, and is never going to be a panacea or silver bullet for business failure.
Companies and businesses that do succeed, display a number of qualities and practices:
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They excel in defining and planning their strategy and remaining focused on it.
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They are also consistent in their execution, delivering to customer expectations, and empowering their employees to make the necessary decisions that will help them remain agile in changing market conditions.
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Their internal cultures have high performance expectations, who motivate their employees and management, and reward them not only financially but also psychologically.
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Their organisational structures are not preoccupied with trivial matters, but focus on streamlining the business, reducing red-tape and bureaucracy. Simplification is the name of the game and the promotion of cooperation between internal departments and personnel.
Given that the statistics for failure amongst independent businesses is reportedly just as high for franchises businesses, of what real advantage is the franchise model? A 1995 study conducted by Dr. Timothy Bates of Wayne State University reports that failure rates among franchised businesses exceeded 30% whilst those same businesses also made lower profits than their independent counterparts. Given the restrictions that a franchise model places on the franchisee, the entrepreneurial creativity displayed by those running successful businesses would hardly have been possible under the rigidity of such a model. Of course, some may argue that such creativity should be coming from those who are the franchisors, but then you have to ask; who is the entrepreneur in this model?
The positive aspects of a franchise model become somewhat less attractive when weighed against the rather harsh picture painted by statistics that haven’t been produced by some national franchise association. Which set of statistics you choose to give more credit to depends on how much vested interest in the franchise model you believe a national franchise association has! I’ll let you work that one out for yourself.
So if the franchise model isn’t all it’s cracked up to be, where do budding entrepreneurs, looking to make their fortune, turn for a safer franchise alternative business model that addresses their concerns over ‘getting it wrong’?
Well, unless you have your heart set on opening a multi-chain fast food restaurant or some other type of franchise, the chances are you’re probably just looking to create some wealth for yourself whilst minimising the risk that inevitably comes with starting any business. If that’s the case, then perhaps a system and model that shows you how you should run your business successfully, without the punitive costs and restrictions of a franchise would be a better option? What about a system that plugs you into the best training and mentorship available, whilst still allowing you to retain your entrepreneurial creativity? A platform that automates all the telling and selling, whilst freeing you to drive customers to your business, with an average 80% profit margins, but without the punitive costs and royalties of a franchise is a reality.
