Hopeton Morrison, Contributor
FOR SOME entrepreneurship is the most satisfying means to achieving lifelong financial independence. And today franchising is the big word in creating your own business space. Franchising is an excellent way to get into business, because it offers a ready-made success package. You are buying into the blood, sweat and tears of the franchiser and for this a franchise fee is often a small token to pay.
All over the world many persons have become fabulously wealthy by purchasing franchises. Among the most popular franchises that locals have bought into are those in the retail petroleum trade and the local and international fast food chains including KFC, Burger King, Subways, Popeyes, Juici Patties, Tastee Patties, Chesters Fried Chicken and Mothers.
The key reason for the popularity of franchising is that it has offered millions across the globe who lack business experience the opportunity to own and operate a business that carries a high chance of success. In fact one new franchise opens in the world every five minutes.
A franchise operates on the basis that a semi independent owner called a franchisee pays a percentage of sales as fees/royalty to a parent company called the franchiser in return for which the franchisee sells its products and/or services. In addition the franchisee also uses the franchiser's business format, systems, name, recognition and marketing arrangements.
Among the several benefits to buying a franchise are the following:
1. You are getting into your own business relatively quickly. The learning curve in the business is climbed rather quickly leading to break-even far more quickly than with most other new businesses. The research is in and more than 75 per cent of franchisees have said that they would purchase their franchise all over again if given an opportunity.
2. New businesses fail because entrepreneurs are often poor managers. This is the main advantage of the pre-packaged management training and systems support offered by franchisers.
3. Many new businesses fail because of inconsistency in the quality of the products and services. Franchises will lose their licence where product and service consistency falls.
4. The franchise offers significant economies earned chiefly from the centralised purchasing process. This leads to major pricing competitiveness which is one of the defining tenets of modern retail strategy ably demonstrated by the world's largest corporation, Wal-Mart.
As with everything else there are disadvantages to buying a franchise. Two major disadvantages are:
1. Major start up and profit sharing charges. In the case of the ongoing royalty fees these are often payable by the franchisee even where the business is not turning a profit.
2. As a franchisee your ability to respond to local market tastes is often hampered as strict adherence to the franchisers limited product line must be maintained.
Here are five steps to starting up a successful franchise adapted from Essentials of Entrepreneurship and Small Business Management by Thomas Zimmerer and Norman Scarborough:
1. Do a thorough evaluation of your traits, goals, experiences, income needs and any other variable that could become an obstacle in your entrepreneurial journey. On successful completion of that find a franchise from among the thousands available worldwide to fit your profile.
2. Research your market to ensure that there is a demand for the product. One franchise that seems to do very well in Jamaica is fast food, and if you set in a well travelled urban centre or major town in Jamaica you should do very well.
3. One of the best ways to evaluate your readiness for a franchise is to interview other present and past franchise owners. Would they buy that franchise again?
4. Franchisers based in the USA are required by some states to register a Uniform Franchise Offering Circular (UFOC). This is delivered to prospects prior to any offer or sale of franchise. Where this or similar documents are available be thorough in doing your homework.
The statistics are overwhelmingly supportive of franchises as a way of getting into your own business. Perhaps the most impressive is that after six years 84 per cent of franchises are still in business. Considering the failure rate of new businesses that is a most impressive statistic indeed.
Hopeton Morrison is general manager of St. Thomas Cooperative Credit Union Ltd. and lecturer in the School of Business Administration at
the University of Technology. Please send comments
and questions to: hmorrison@stccu.com
