• Expert Advice

Entering the franchise industry can be an enticing prospect for aspiring entrepreneurs. With a proven business model, built-in brand recognition, and support from the franchisor, it offers a promising path to business ownership. However, one crucial decision that potential franchisees face in whether to invest in an established brand or opt for a new and growing franchise. While established franchises may seem like the safer choice, there are compelling reasons why buying into a brand that is still growing could be a strategic move.

The Appeal of Established Franchises

Established franchises often come with a track record of success, a loyal customer base, and well-established operational procedures. For many prospective franchisees, these factors provide a sense of security and stability.With a known brand, there’s less uncertainty about the potential for profitability and longevity.

Futhermore, established franchises typically have a robust support system in place. From comprehensive training programs to ongoing operational assistance, franchisees can rely on the franchisors expertise to navigate challenges and capitalise on opportunites.

New Franchise vs Unproven Concept

Understanding the distinction between newly launched franchise and an unproven concept is crucial. The old saying “You cannot franchise and idea” still holds true. To franchise a business idea, the originator must have successfully operated at least one unit of the business for a reasonable period.

The business’s system and processes must be optimised and documented to enable exact duplication. This business should also have a registered trademark and operate in a stable market with proven potential.

A comprehensive franchise expansion plan must be developed, along with the necessary legal contracts and other documentstion for professional franchising. It is essential for the new franchisor to recognise that franchising a business requires a different skill set than operating one. To drive the project forward, appointing a franchise champion dedicated solely to developing the franchise is neccesary.

The Potential of Growing Franchises 

Buying into a new and growing franchise presents unique advantages that shouldn’t be overlooked. While the brand may not have the same level of recognition as established franchises, it offers the opportunity for early involvement and potential for significant growth,

Some of the benefits include the potential for lower upfront costs. Unlike established brands that may require substantial initial investment due to higher franchise fees and marketing demand, growing franchises often offer more favourable financial terms to attract franchisees. Secondly, with fewer exiting locations, there’s greater flexibility for available areas and locations.

Being the first franchisee in a planned network can be both exciting and highly rewarding, but it also comes with its challenges. Regardless of how meticulously the franchise package has been developed on paper, actual implementation is likely to reveal flaws. Unlike franchisees of establsihed networks who receive a “blueprint to business success,” the pioneer franchisee will get guidelines that haven’t been tested in a real-life franchise scenario.

Challenges for New or Growing Franchises

Prospective franchisees should be aware that, in addition to taking on greater risk, they may encounter other challenges. For example, bankers typically favour franchising because they know that a newcomer receiving initial and ongoing support froma franchisor has a better chance of success than an independent entrepreneur. However, this reassurance is mostly absent with a newly launched franchise.

The new franchisor’s track record in the core business, the solidity of the franchise plan, and the prospective franchisee’s own financial standing are likely to play a more significant role in lending decisions than usual.

Another potential drawback is the lack of support from other franchisees. Before joining the network, you cannot interview established franchisees to learn how the system works for them. After signing the franchise agreement, you won’t have fellow franchisees to turn to for moral support or practical assistance. It will be solely between you and the franchisor.

Mitigating the Risks 

While the prospects of joining a growing franchise may be appealing, it’s essential for potential franchisees to conduct thorough due diligence before making a decision. Researching the franchisor’s background, financial stability, and growth plans is crucial to understanding the brands potential for success.

Futhermore, franchisees should carefully evaluate the market demand and competitive landscape in their target location. A growing franchise may offer unique products or services, but its essential to assess whether there’s sufficient demand to support sustained growth.

Franchisees should also consider the level of support and resources provided by the franchisor. While growing franchises may offer exciting opportunities, adequate training, ongoing support, and proven operational systems are essential for long-term success.

Conclusion

In conclusion, entering the franchise industry presents both opportunities and risks, particularly when considering whether to invest in a growing franchise. Established franchises offer a proven track record and robust support systems, providing a sense of security for potential franchisees. On the other hand, new and growing franchises offer unique advantages such as lower initial costs, early involvement in shaping the brand, and potential for significant growth.

Howeveer, it is crucial for prospective franchisees to approach the decision with careful consideration and due diligence. Researching the franchisor’s background, evaluating market demand, and assessing the level of support provided are essential steps to mitigate risks associated with new or growing franchises. By doing so, franchisees can position themselves strategically to capitalise on the opportunities presented by a dynamic and evolving franchise landscape.