Thursday, December 8, 2011

ENT630 – Franchising #5 What Does A Franchisor Provide & Failure Rate (WEEK #3)

What is Provided by the Franchisor or Franchisees. Failure Rate of Franchises

When you buy a franchise, you are not only going into business, but you are buying a known entity with a proven performance data, good or bad. According to www.allbusiness.com a franchisor will offer the following:
·         Financial Assistance – some provide additional financial assistance
·         Location Selection – since the franchisor has experience in location selection, then this benefits the franchise to rely on their knowledge and experience
·         Training / Operations Manuel – most companies provide intensive training from a proven operations manual
·         Advertising – the cost for advertising is split out over all the franchises which reduces the franchise expense but benefits from a national campaign
·         Support – Franchise owners always have access to a wealth of knowledge and experience

Most franchises are looking for a specific individual same as the investor is looking for the right fit. According to Cliff Ennico the host of Money Hunt on PBS, “individuals can operate under a trademark that has instant brand recognition, you are your own boss and the failure rate for franchises is lower than it is for mom and pop businesses.” When these benefits are compared to a new start up then everything you do has to be tried and proven. Many individuals are not willing to take a risk because of these facts. A franchise helps provide the foundation for a business that has an established record. However, this still does not guarantee each business will be a success.

Purchasing a franchise may give a owner a false sense of security because of the support from the parent company. Someone that buys a franchise must still work hard at making sure the business is a success. It is the owner’s job to do everything necessary to develop and grow the business. Certain categories tend to have a higher failure rate than others. According to www.azfranchises.com, fast food including juice bars and ice cream shops tend to have a higher failure rate than service franchises. Just because some decides to go this route does not mean instant success. All of the principles concerning building a successful business apply.


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