Franchising is a popular approach to modularise a business, so it can be replicated in other locations. In many ways, it’s the complete opposite to starting a business from scratch, with a new brand that no one has heard of, and products that will take time to develop too. Instead, it provides an entry-point using an established brand and business model that has already proven to be successful. Here is why franchising is a good way to grow your business.
Avoid the High Business Failure Rate
Depending on the industry, the failure rate for a new business is as high as 91 per cent. This is according to ONS, the statistical people responsible for government information. In 2019, when the Office for National Statistics looked at businesses founded five years before, only 41 per cent were still in operation. Those numbers speak for themselves. The main causes of failure for most small businesses are:
- Bad management
- Poor planning
- Overspending on marketing
- Not enough capital
- Disconnection between goals and actions taken
Uses a Proven System
There are plenty of franchise opportunities in the UK. Will your business model be more attractive than the others? People thinking about starting a business can choose whether to start from a blank page with all the inherent risks of doing so or to look for a franchise they can apply for as a franchisee.
If they’re an entrepreneur brimming with new ideas and the money to pursue them, then franchising won’t likely be for them. However, if they’re short on ideas but long on funding, then they’ll be seeking greater certainty to avoid losing their money.
Due to it being a specialised area, it’s worthwhile to read about franchising from a dedicated source. The FranchiseLocal.co.uk website provides useful information for both UK franchisors and franchisees: find out more here.
Potential Business Owners Seek Safety
Not every business owner is a natural risk-taker. Some prefer not to be an employee, but nevertheless, they aren’t the type to go skydiving or take other unnecessary risks in life. Similarly, starting something new where no one has heard of them and attempting to build a UK brand from scratch is daunting. And given the higher failure rate of UK businesses in the early years, it’s clearly one that’s prone to disappointment too. This is a major selling point if you’re looking to turn your business into a franchise and to sign up eager franchisees.
Growth Potential without Massive Capital to Do It
One way around needing to borrow extensively to expand a business is to franchise it. Instead of borrowing from the banks or going to the City of London for a bond issuance as a public company, franchising means the franchisee will put in the money to purchase a franchise. They’ll also sign the lease and move ahead with purchasing stock through your business too. While there are certainly some expenses involved in signing up and helping to set up new franchises under your system, only businesses with sufficient resources will do so.
Just be sure that your business is ready to become a franchisor. It must already have a proven, profitable business model that can be replicated in other locations. This is required not just to ensure franchisees can be profitable too, but also to generate interest in the franchise market.