Starting an independent business is the dream for many, but it’s also extremely tough. Franchising offers a strong alternative that allows an entrepreneur to be their own boss but with a massive support network, ready to fill in the gaps and facilitate success.
Words by Raghav Patel, digital content writer at Global Franchise
Becoming a successful entrepreneur is one of the most exciting and difficult challenges a person can take on in their life. To start a business, operate it and make it profitable is extremely challenging and can see the most driven, talented and intelligent individuals crumble in the face of adversity.
It’s a well-known fact that most startups end up in failure, but it’s the few successes that motivate and inform thinking, not the unfortunate failures. However, there is a way to take on the challenge and reap the rewards of starting a business without having to build every function from scratch.
The answer is franchising. Franchising, defined simply, is a ready-made business in a box. Franchisors’ own success is directly tied to generating new and profitable franchisees. Unlike a regular startup business, a franchised business is still on its own in all the ways that matter, but is supported by a massive franchise network. This support can often come in the form of employee training, taking over of marketing campaigns and the management of any company-wide functions that allow franchisees to focus on their business and its day-to-day operations.
The franchise industry was able to prove its worth during and after the pandemic. Franchisees benefitted from behaving like small businesses where it suited them, but also gained from the sheer size and scope of their franchise networks.
The difficulty of starting an independent business
Starting an independently owned business is often the dream and gold standard for many. It’s an incredible achievement to create something from scratch and over time and make it successful; creating value in the economy and giving livelihoods to employees.
But it’s one of the most, if not the most difficult undertaking a person can make in the world of business. Many entrepreneurs are often blinded by the vision of a successful business but do not consider the debilitating hardships along the way. In the U.K., 60 per cent of all startups fold within three years, and it’s rarely for one reason. An analysis by Stryber found that European startups have an 89 per cent failure rate.
Franchising offers a different picture. The 2018 British Franchise Association (bfa) NatWest survey found less than one per cent of franchisors closed per year due to commercial failure.
Numbers from the Bureau of Labor Statistics’ Business Employment Dynamics suggest it is similar in the U.S.A, with 20 per cent of businesses failing in the first year and 50 per cent failing in their fifth. There are a variety of reasons that these startups fail, because there so many facets to the running of a business.
Whether it’s access to capital, good employees or problems of an entrepreneur’s own making, there are several pitfalls along the journey that have claimed many promising businesses. Sometimes, failure can come down to bad luck. Many businesses may have had strong concepts, strong teams and even strong figures, but the global COVID-19 pandemic threw that all to one side.
In the U.S., over 340 businesses reported going bankrupt during 2020 alone, with all of them laying some of the blame at the door of the global pandemic. Iconic American retailers like J. Crew filed for bankruptcy and closed all 500 of its stores. While it’s no secret that the business was suffering before the pandemic, it came very close to sounding the death knell for the business. The likes of J.C. Penney and Neiman Marcus Group have suffered similarly during these periods.
“If I tried to recreate what I currently have as part of the franchise system, I don’t think there’s any way that I could have done it,” said Len Silverman, an International Franchise Association (IFA) award-winning Huntington Learning Center franchisee with four centers.
“I decided I didn’t ever want to get laid off again. And I figured, if I work for myself, I’m the only person who can fire me.”
“Because being an entrepreneur means, at least early on, you have to be an expert in every part of your business operations, marketing, accounting, finance, I’ve got strengths, I think I’m okay at a lot of stuff. But my main strength really is marketing.
“By buying into a franchise, I was able to offload the operational stress onto somebody else. Then I can focus on what I think that I’m good at.”
Starting and running an independent business isn’t for the faint-hearted, but can defeat even the most intelligent, savvy and driven entrepreneur. The world of business turns out to be grey in practice, and it takes a confluence of factors to converge to bring success; some of which may not even be in your control.
How franchising can be an outlet
Starting a business is deeply involved and requires an individual to control every aspect of it, from negotiating with suppliers to dealing with customers. Franchising is about perfecting a concept and its operations, and replicating that across multiple regions with enthusiastic, entrepreneurially minded people. Franchising still offers a high degree of control over an entrepreneur’s own destiny, though not as much as an independent business owner.
It still offers that same degree of control over their life and career that cannot be found in a salaried role.
“When we were emerging from bankruptcy [from Fruit of the Loom], they had a layoff, and a lot of the top marketing people were available. That moment was when I decided to become an entrepreneur, because I decided I didn’t ever want to get laid off again. And I figured, if I work for myself, I’m the only person who can fire me.” said Silverman.
Franchising removes a great portion of what it required to run a business, and hands those responsibilities to the franchisor, who can benefit from years of experience and a mountaintop vantage point.
“I decided franchising was for me when I looked and realized that I wanted to deal with the heart of the matter, rather than the periphery – social media, brand and other aspects – and really wanted to coach businesses,” said Gary Keating, an ActionCOACH senior partner for Bristol.
“ActionCOACH’s global community gives you so much to draw on for guidance, support and knowledge.”
Supplier negotiation, for example, can be a very difficult area for an entrepreneur to navigate. Without the experience and expertise, a new business can end up paying significantly more than they ought to, and even purchase to inefficient forecasts. The sheer size of franchisors drives prices down, and suppliers are less likely to make a mistake with a large franchisor’s order than with a small, independent business.
Franchising not only completely and utterly removes this issue from the hands of the franchisee, but the franchisor will also take the lead on marketing activities and campaigns. Most franchises allow for some local promotion too, giving franchisees room to maneuver in their local market to respond to changes.
The single biggest thing a new entrepreneur will benefit from when taking on a franchise is the brand. Building a brand is a notoriously difficult venture, and crumbles a lot more easily.
The food and beverage industry provides a strong example of the power of branding. Building a food brand is a task that takes years. Franchisees benefit from the hard work of the founders and those who came after. Years and decades of brand building means a franchisee can open a restaurant in a location and is likely to attract some customers due to the presence of the brand in other regions or countries. An independent business owner has to start from scratch.
While an entrepreneur will not have total control over every element of the business in a franchise, they will gain stability and resiliency, key factors for those who are just beginning their adventure in the world of business. An entrepreneur can still derive satisfaction from running a business, being responsible for employees and customer satisfaction without negotiating with suppliers or creating the marketing calendar for the next quarter.
Some franchisors really proved their worth to their franchisees during the pandemic.
“The last 18 months are proof that they offer a lot of support, they’ve added a lot of additional avenues for revenue generation for us, including things like homework help, and being able to convert to online instruction,” said Silverman.
“And all that happened really, very quickly to support a system which, like everybody else was going into shutdown.”
The support a franchisor can offer
Entrepreneurs benefit from the sheer size of the franchise. Many franchise networks are sizeable, and the largest can consist of thousands of locations all around the world. Franchisors are obliged to help their franchisees, whether it’s financial assistance or running key functions for them.
“If I was in a situation today, like I was 17 years ago, and I was let go from a company, I would absolutely go franchising again.”
“There’s daily support if I want to access it – global and U.K. support teams offer the knowledge, systems and resources to support my clients and grow my own business,” said Keating
“But I also have 1,000 franchise partners globally who all have the same culture of abundance, willing to share advice at the drop of a hat.”
The core of any business is its service or product. However, many companies produce good services and products but don’t necessarily succeed in the long-run.
If a business can’t effectively show off its quality and persuade people to become their customers, the product or service becomes irrelevant.
Marketing is a deeply complex area to navigate, and often holds the key to success. While some are more naturally predisposed to marketing, it’ll take even the most talented marketer some time to build a profile and make some gains.
Many franchises started out as independent businesses in the past and adopted a franchise model to facilitate growth, meaning that there can be years of marketing expertise behind many franchise brands for a franchisee to benefit from.
Most marketing campaigns won’t require brainstorming and implementation by franchisees; that will be the remit of the franchisor, giving more time to perfect day-to-day operations.
Site selection and financial assistance
Without any experience, picking locations to start a new franchisee can be a daunting prospect for a new franchisee who is without experience in that field.
Franchisors seek to help franchisees by doing a lot of work for them, when possible. Franchisors can benefit from their experience to select the most effective locations for a new unit.
Franchisors can also make use of relationships with lenders and banks to secure discounted financial assistance for their new franchisees. Many franchises such as Marco’s Pizza offer in-house assistance for franchisees who open multiple units and even guarantee a portion of the loans provided by banks to franchisees.
Opening a new franchised location often involves training staff; something many franchisees may have no experience of.
Franchisors have the benefit of having gone through this experience many times with franchisees, therefore many franchisors have developed internal knowledge centers that do the hard work of training employees and providing resources for continual improvement.
“Huntington has what they call HLC University, which is an entire training manual. It’s a repository of a tremendous amount of training materials,” said Silverman.
“So when I hire a new employee, I want to do training with that employee, but there is also source material that I can send them directly from Huntington’s first, and then I can refine it. That for me now, as a multi-center owner, provides a tremendous amount of efficiency.”
Make the plunge and buy a franchise
Entrepreneurship is something many people aspire to: being in business for and by themselves. Entrepreneurs are in charge of their own future and there is no upper limit.
However, nothing worth doing has ever been easy. Entrepreneurship, starting an independent business has claimed the enthusiasm for business for many and left them jaded. While many are capable of bouncing back strongly from such a setback, some are not.
The desire to be an entrepreneur and be your own boss is easily satiated through franchising. Not only does it satisfy that entrepreneurship bug, but it is also likely that an entrepreneur is guaranteed a higher level of success in franchising, than an independent business.
“The best part about franchising in my opinion is, as opposed to starting something from the ground up where everything is a mystery. With franchising, you can do a lot of homework,” said Silverman
“You can see how many units there are, how many have been successful, what their average revenue is, you can call around talk to other owners get a profile from them of what makes a successful owner.
“If you’re starting something from the ground up, you have none of that. If I was in a situation today, like I was 17 years ago, and I was let go from a company, I would absolutely go franchising again.
“And I think the proof is in the pudding given my results.”
Franchising is its own industry. Perfect one concept, and an entrepreneur can manage and open multiple units, which could eventually lead to the creation of a franchisee group. From there, the limits are endless. Whether it’s relentlessly growing one brand or adding many to a portfolio, the sky is the limit with franchising.