How to choose the right type of franchise for you
The defining question in choosing your franchise opportunity is about how you want to run your business and not necessarily what type of product or service you provide. So let me ask you a question:
Do you want a franchise business that is a job replacement - you work in your franchise in return for an income - or one that gives you scope to grow, expand your earnings and the ability to focus on what you’re best at?
Any budding entrepreneur has a tendency, at the start of their business journey, to try and do everything themselves. The problem with this approach is that your scope for growth is limited to how many hours there are in the day and how much you can physically do.
Successful business owners will tell you that their defining moment of growth is when they realised they couldn’t do it all themselves and that by focusing on what they were good at they had many more opportunities to increase their income and grow their business.
So I revert to my question above: do you want a business you can work on or a business you work in?
In the franchise market, you have options as to the type of structure you prefer. Here’s an overview of the different franchise types there are, depending on the kind of business you want to run:
The business format franchise
This is perhaps the most typical franchise model.
You purchase the rights to the franchise trademark, trade names and all the business systems and processes you’ll need to operate your business. It’s a prescribed model and you’ll pay the franchisor for the right to sell the product or service. You may also have to buy your materials, stock and, potentially, uniforms directly from them.
This model tends to work best for those who want to work on their own and generate a steady income from their own efforts.
•Pro: you’re not responsible for anybody else.
•Con: you can only increase your income by working longer hours yourself.
The product distribution franchise
This franchise concept is similar to a supplier-distributor set up in that you pay a fee for the right to sell and market the goods you buy directly from the franchisor. The franchisor is responsible for providing the product and you’re then able to sell it.
Your franchisor will provide all the products, but there is less training, support and business set-up advice than there is with other types of franchise. Essentially, you’re buying the right to sell a product.
With this type of franchise, you can be much more independent in terms of not having the restrictions a business format franchise might place on you.
- Pro: you’re guided by a structure and a brand.
- Con: you can only grow at the pace the franchisor can provide the products.
The management franchise
A management franchise is entirely different to both a business format and product distribution franchise. While you’re still a franchisee of your chosen business, it’s a business that you run, but with other people carrying out the business activities.
The franchisor will provide you with everything you need to run your business, including all equipment, full professional support in setting up, full training throughout your franchise agreement and a marketing launch.
You manage your own operation, but under the umbrella of the franchise name, while following the franchise business model from there on is up to you, as is how much or how little you develop the franchise.
- Pro: there’s no limit to how much you grow your business and your income.
- Con: you’ll need to rely on others to deliver your product/service.
Which option should you choose?
Now you know the difference between the various types of franchise, which one is best suited to you?
This depends on what type of business you want to run, how comfortable you are in managing others and whether you want a business you can grow or are happy generating an income that meets your standard of living requirements.
If you have experience in management or are looking to have a hands-off approach to how you run your business, the management model is probably the best option for you.
It gives you the opportunity to develop both systems and resources all within the safety net of a franchise structure, enables you to think strategically about how far you want to take your business and be the master of your own destiny.
Buying a franchise is an excellent way to set up and run your own business. By following tried and tested systems and processes, you’ll have a greater chance of success than going it alone.
Knowing that you have further options as to the type of model you invest in, makes franchising the best choice for setting up your own business.
Lisa Stead is franchise manager at Shuttercraft.