Should Entrepreneurs Play Their Hand with Franchises?
A common view people share is that franchisers are only looking for entrepreneurs to participate in their franchise systems. Nothing could be further than the truth. For starters, bona fide entrepreneurs are heavy risk takers that start out from scratch, usually with a solid business plan in hand as well as adequate financing. They understand that challenges will arise, but believe in their entrepreneurial ability to leap over these obstacles.
In other words, they aren’t afraid to take risks if business called for an additional $2000 to be thrown into the budget. Since starting up a business is a volatile proposition, entrepreneurs thrive in their ability to do whatever they want. Business decisions are left entirely up to them. This is the defining characteristic of American capitalism.
Now, compare this with the needs of a franchise company. A well-reputed franchise has made the investment to perfect an operating system based on trial and error done through experience. Throughout their operating years, franchises become more adept at tweaking their systems to better generate sales and recruit customers. Franchises are looking for those that want to participate in this time-tested program, not those who want to change it themselves. Prospective franchisees have to be willing to accept the operating and marketing system the franchise has put into motion.
Franchises use this approach because they want to minimize risk by implementing new programs, saving capital, and being at peace knowing a time-tested program is being put to work. Bona fide entrepreneurs might find themselves limited in this type of business model, which leaves out self-expression and creativity. For those entrepreneurs with a high sense of confidence, this business model could become a blow to their psyche. Does this mean true entrepreneurs shouldn’t participate in a franchise program? Not exactly! Here are some things you should take into consideration:
Risk vs. Reward – Sometimes, entrepreneurs have already attempted to startup their own businesses. Maybe they have an existing independent business raking in $190,000 a year in profit. With success, one already knows entrepreneurs have overcome many obstacles already. Because this experience can be volatile in nature, entrepreneurs are willing to transition themselves into a program that eases up on financial planning and risk management associated with a business startup.
Comfort level – After years of business startup stress, entrepreneurs might want to take it easy and invest in an already established system with a lesser degree of uncertainty. The only caveat is that they must give up a bit more freedom and creative control. If you’re OK with this, franchising can become a viable option for you. Just exercise due diligence and understand the rules so you can make an easier transition into franchise hood. If you’re quarreling with field representatives over clause 8 of the franchise agreement, it doesn’t do both sides any justice.
Creative Input Opportunities – Solid franchise systems always let franchisees have a say over company operations, particularly when referring to system improvements. This can allow entrepreneur-minded individuals to exercise their inner creativity. For example, some franchises have advisory groups that franchisees participate in to make recommendations on the system. Company systems can range from marketing and advertising campaigns, operating, technological, and others.
Entrepreneurs and franchises can only mix if the entrepreneur is willing to give up control. He/she must understand the time-tested system the franchise incorporates is a surefire way for both parties to succeed in the long run.
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