Franchise Business: A Comprehensive Guide

BusinessEcommerce

  • Author Blessing Edet
  • Published January 1, 2024
  • Word count 1,613

Embarking on a new business venture is undoubtedly a daunting task. From conceptualizing a viable idea to devising marketing strategies, building a brand, assembling a team, and securing funding, the process can be overwhelming. However, there is a solution that can simplify this journey - Franchise Business.

In this informative article, we will delve into the world of Franchise Business, exploring its definition, operational mechanisms, prerequisites for starting, and much more. By the end, you will gain a clear understanding of the benefits associated with this business model compared to starting from scratch.

Understanding Franchise Business

Franchise Business refers to a system wherein a group of individuals acquires the rights to operate a business under the established logo, model, and name of a larger company, typically a multinational corporation. These rights are sold by the owners or franchisors to the private operators, known as franchisees, who then run the business in a different location. Essentially, a Franchise Business is an extension of an already successful enterprise, operating in a manner identical to its parent company.

The relationship between the franchisor and franchisee is governed by a contractual agreement. Numerous examples of franchise businesses can be found in our daily lives, such as Mr. Big, Chicken Republic, Shoprite, Domino's Pizza, and Pizza Hut, to name a few.

Setting up a Franchise Business

The process of establishing a Franchise Business involves several key steps. These include identifying a suitable franchise opportunity, conducting thorough research, evaluating financial requirements, and adhering to the franchisor's guidelines and protocols. By following these steps diligently, aspiring entrepreneurs can pave the way for a successful franchise venture.

Types of Franchises

Franchise Business offers a diverse range of opportunities across various industries. From fast food chains to retail outlets, service-based enterprises to hospitality establishments, there is a franchise option available for almost every sector. Understanding the different types of franchises can help entrepreneurs make informed decisions and select the one that aligns with their interests and goals.

Pros and Cons of Franchisee Business

Like any business model, Franchise Business has its own set of advantages and disadvantages. It is crucial for potential franchisees to weigh these factors carefully before making a commitment. While the benefits include established brand recognition, ongoing support from the franchisor, and a proven business model, there are also considerations such as financial obligations, limited autonomy, and potential restrictions imposed by the franchisor.

When to Consider the Franchise Business Opportunity

Determining the right time to pursue

Points to consider:

  1. The franchisee does not purchase the rights to the franchisor's products, but rather the rights to use the established brand name for selling those products.

  2. The proven business system and methods will remain unchanged.

  3. The process, uniforms, pricing, and other aspects will mirror the original business model.

  4. The franchise will be an outlet in the same city or a different city, but will maintain the same representation of the successful business operation.

  5. For more clarity on purchasing a franchise or to finalize decisions, professional organizations specializing in franchising can be contacted.

Different Types of Franchises:

  1. Fast Food Franchises: These are widely recognized franchise businesses, including popular brands like Chicken Republic and Mr. Big.

  2. Retail Franchises: This category encompasses businesses that directly sell products to consumers, such as convenience stores, automotive parts stores, clothing stores, and electronic stores.

  3. Service Franchises: These franchises offer various services to customers, including cleaning services, home repair and renovation, tutoring centers, hair salons, fitness centers, and printing services.

  4. Hotel and Lodging Franchises: This category includes franchises operating hotels, motels, and other lodging establishments. Well-known examples include Sheraton, Ikoyi, and Radisson Blue.

  5. Automotive Franchises: These franchises provide services related to automobiles, such as car rental, auto repair, car wash, and gas stations. Companies like Dunlop fall into this category.

Education and Training Franchises focus on providing educational services and training programs, such as tutoring centers, language schools, preschools, and test preparation centers. Health and Fitness Franchises encompass fitness centers, gyms, yoga studios, and wellness centers, with brands like Anytime Fitness and Snap Fitness operating through franchising. Real Estate Franchises offer services related to property sales, rentals, and management, including residential and commercial real estate agencies. Business Services Franchises provide various business-related services, such as accounting, bookkeeping, consulting, printing, marketing, and staffing services. Home-Based Franchises allow individuals to operate a business from their homes, spanning industries like home-based travel agencies, home cleaning services, and online retail businesses. In Nigeria, there are several top franchise businesses available. Before purchasing the rights to a franchise business, it is crucial to consider the pros and cons. One advantage is that owning a franchise business involves investing in a tested and proven business, reducing the risk of low profits and growth. Additionally, franchisees receive training on the established business system and technology, gaining valuable hands-on experience.

Marketing Strategy – Running a successful business requires the implementation of various marketing techniques. Franchisors already have established business strategies and advertising materials that can greatly contribute to the rapid growth and success of the business.

Support – Franchisors offer a wide range of support to their franchisees. Not only do they provide assistance through the use of advanced technologies and methods, but they also lend support in terms of locating suitable business premises. The significance of a prime location is evident in the potential profits, which will be shared by both the franchisee and the franchisor.

Connections and links – Other franchisees may have encountered similar challenges that you are currently facing. Engaging in discussions and sharing problems with fellow franchise owners can provide valuable insights and help you develop a better business plan and strategy.

Cons:

Initial fees – Purchasing the rights to a franchise involves an initial payment, which is essentially the cost of acquiring the business license. The fees vary across different brands but are generally quite substantial, ranging from a few hundred thousand to several million.

Payment of ongoing royalties – Ongoing royalties are calculated based on the total sales of the franchise outlet and must be paid at regular intervals, such as monthly or annually. These royalties typically range from 5% to as high as 12% of the monthly sales.

Adherence to rules and regulations – Even after purchasing a franchise, it is essential to comply with the predetermined rules and regulations. This ensures consistency in the quality and experience of the brand, such as the taste of Domino's or Pizza Hut being the same across different locations worldwide.

Marketing funds – Marketing strategies require financial investment. Franchisees may be required to allocate a certain percentage, typically 1 or 2%, of their total sales towards marketing expenses.

If you ever decide to sell your franchise, it is important to note that the franchisor must approve the buyer. You cannot simply sell your business to just anyone. Before making a decision to invest in a franchise, it is crucial to weigh the pros and cons of this business system. Consulting with a franchise attorney can help you finalize your decision and understand the franchise agreement before signing a contract. Another important consideration is when to start a franchise business. The advantage of investing in a proven business system is that the risk of failure is low. Additionally, with a franchise business, you don't have to worry about the time it takes for the business to grow. The franchisor provides support and guidance, ensuring that any challenges along the way are addressed. In Nigeria, there are several websites that offer low-cost franchise business opportunities. These websites provide different categories and price ranges to suit various investment plans. They also offer options for choosing the best location for your franchise business. Some of the websites you can explore include Entreprenuer.com and Franchise Direct.com.

Biz Buy Sell.com, Franchising.com, and The Franchise Mall.com are websites where you can explore various franchise business ideas. These ideas range from starting a restaurant, setting up a cafe, opening a gym, starting a beauty salon, and much more.

If you are considering low-cost franchise business opportunities, there are several reasons why you should give it a thought. Nigeria, being the second most populated country after China and the seventh-largest country in terms of area, offers immense potential for investment. It is also the second most ever-growing consumer market in the world, making it an attractive destination for multinational companies to expand their business and generate profits.

The franchise industry in Nigeria has gained international recognition as a highly attractive market. Many renowned brands from around the world are targeting Nigeria for further expansion and growth. Professional organizations are available to assist franchisees in addressing any concerns or problems they may have when starting their business.

If you are planning to start a franchise business and want the freedom to choose from affordable-cost business models, the aforementioned websites can provide valuable assistance.

When comparing a franchise business to starting your own business, one of the most common questions that arise is which option is better. The key advantage of a franchise business is that you enter into an already established business, reducing the risks associated with growth and profitability. This is particularly beneficial if you lack previous business experience.

On the other hand, starting your own business from scratch can be challenging, especially in the initial years. In fact, studies show that only 1% of new businesses in Nigeria have a chance of survival. Therefore, when deciding between the freedom of starting your own business or the security of a franchise business, it is important to make a well-informed decision.

In conclusion, owning a franchise or starting a franchise business is an excellent way to enter the world of business. It offers the opportunity to tap into established brands and benefit from their success while minimizing risks.

Blessing Edet has over 7 years of experience as a social entrepreneur and in volunteering for community development sector, specially focusing on pushing for a collaborative economy and building strong communities. Currently, Blessing is the CEO of Thrivement Ltd and Founder of ActAids Africa Foundation which focus on Technology, Child Education, Youth and Community Development, where she focuses on initiating, designing and implementing.

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