Sep. 30, 2024
Franchising a retail business allows you to see greater success faster than starting from scratch.
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The benefits of franchising a retail business are tenfold. When franchising with an established well-known brand, you get a loyal customer base, brand recognition and much more. Below are the top five benefits of franchising a retail business.
No Industry Experience Needed
One of the greatest benefits of franchising a retail business is that little to no industry experience is necessary to get started. Many retail franchisors have built-in models with a step-by-step process to follow when starting their business, making getting started almost foolproof.
&#;Franchising provides a consistent and well-thought-out business structure in a box, which greatly reduces the risk of failure,&#; said Doug Payne, serial franchise owner and founder of OHM Fitness. &#;Franchisees can leverage the ready-made processes and the support of the franchisor to operate their businesses successfully.&#;
Franchisor Support
In addition to built-in models, many retail franchisors offer support for franchisees. Some retail franchisors have networks where franchisees can talk to each other and can reach out if they run into problems unlike starting an individual business from scratch.
&#;The biggest benefit is that the brand has a proven track record of success, and provides me with training and support to set my location up for success, while still allowing me to have flexibility and freedom,&#; said Courtney Florence franchisee of The Birthday Suit waxing spa. &#;The Birthday Suit's retail product line component is an easy upsell that supports the longevity and success of our services while allowing us another revenue stream to profit off of.&#;
Scalability Opportunities
When starting a retail business, you have a greater opportunity to scale your business sooner than you do when starting your own business. Retail franchises allow you to start earning a profit faster because you already have an established customer base, making it easier to scale your business. You may also be able to secure financing for your franchise, allowing you to pay off your loan faster and reduce the amount of your own investment funds.
&#;Franchising creates brand awareness at a scale that is difficult to achieve as a stand-alone mom-and-pop business,&#; added Payne. &#;As more and more franchise locations open, the brand value increases.&#;
Low Failure Risk
Since franchisees are getting a step-by-step, startup guide and an established customer base, the risk of failure is much lower. Franchisors are also there to provide you with support and assistance, which makes it more difficult for you to fail. Many franchisors offer marketing assistance and ready-made marketing kits, which takes the guesswork out of how to market your business. Some franchises also provide franchisees with data from their previous stores so you get a background of what works and what doesn&#;t, and allows you to better help your business succeed.
Brand Recognition
When opening a popular retail store, you get automatic brand recognition. This reduces the amount of marketing you have to do because everyone already knows the business. When opening your store, you have to come up with a name that sticks in people&#;s minds and also explain what your business is and what it sells.
When it comes to retail entrepreneurship, there are several ways to open a business. You can launch your own sole proprietorship&#;whether it&#;s an ecommerce shop or brick-and-mortar store&#;and have complete independence but little support.
Or you can take advantage of one of dozens of franchise opportunities and have the power of an existing brand behind you.
Retail franchising is the method of opening a single store under the umbrella of an established name, branding, trademark, and product line. Franchise businesses are all around us and are often the brands we shop at and trust the most.
Compared to starting a sole proprietorship, opening a franchise comes with a different set of rules, expectations, and skills. In this guide, we&#;ll explain how retail franchises work, explore some pros and cons of operating this type of retail business, and provide some basic steps to getting started.
Retail franchising is a model for expanding a business and distributing goods and services through a licensing relationship.
A franchisee (you, or the location owner) pays an initial fee and ongoing royalties to a franchisor (the brand or &#;corporate&#;) to use an existing company&#;s trademark, logo, and system of business, as well as the right to sell its products and have constant support from the franchisor.
In terms of entrepreneurship, franchising is the opportunity to work for yourself but not by yourself.
There are two main forms of franchising:
Often times, franchise businesses use a hybrid model incorporating both these forms.
Launching a retail business is tough and not for the faint of heart. Retail entrepreneurs must come up with the business idea, write the business plan, secure investors, source products, find a location, hire employees and spread the word through marketing, advertising, and social media.
There&#;s also a chance that a single misstep could cause the entire business to fail. Starting a business always involves some level of risk.
This isn&#;t to say that opening a franchise doesn&#;t come with its own risks, but one of the benefits of opening a franchise rather than a sole proprietorship is the higher chance of success. According to Franchising.com, here are some other benefits to opening a retail franchise:
Launching a franchise is much faster than opening a sole proprietorship business. According to All Business, new franchises take around two and 12 months to launch, depending on the type of business.
Sole proprietorship businesses, however, can take anywhere from a couple of months to well over a year. An article in the Houston Chronicle advises that business owners should start planning no less than a year before their proposed launch date.
With franchises, a business model is already in place and franchisors likely have their own guides for franchisees to follow. If you&#;re looking to open a business quickly, a franchise could be the way to go.
The franchisee and the employees they hire can rely on tried-and-true training and ongoing support.
THE MIDI. supply professional and honest service.
Franchising is a team effort, so franchisors know that in order for their company and brand to maintain a solid reputation, it&#;s important to ensure that all of their franchise stores operate according to a certain standard. Most franchisors have field support representatives that help franchisees obtain training beyond operational, technical, and financial aspects to run the business.
This might include how to hire and manage employees as well as how to build community relationships. Don&#;t be shy about asking for help from your franchisor. They&#;re there to not only help you fix rookie mistakes, but to avoid them all together.
After all, your success is their success.
Scouting out a retail location can be one of the trickiest parts of retail. You want an area that offers some healthy competition but isn&#;t over-saturated with similar businesses.
You may need to take into consideration how much pedestrian traffic a neighborhood attracts, and perhaps the biggest concern is what the rent costs are in a given area.
Often, established franchises will provide assistance in finding an optimal site. After all, they&#;ve already done their research and have a proven track record of what areas work best for their business.
You launch a new retail business and know you offer a great product, but how does the public know? It takes years for entrepreneurs to build up a reputation and a solid customer base, but a franchise business already has one. Opening a franchise comes with the selling power of a known brand.
So, when potential customers see your new franchise location, they already have an awareness of the brand and products and know exactly what to expect.
Another benefit that might not be as obvious to business owners is the lower costs associated with group purchasing.
Franchises require all of their stores to sell the same or similar products, and the only way for them to guarantee that is to enable all of their franchisees to purchase from the same lot.
Group purchasing power can drastically reduce warehouse costs because your company is able to buy 100,000 units rather than 100. For example, the average coffee shop owner might purchase coffee cups for around .40 per unit, while a coffee shop that&#;s part of a franchise may source the same coffee cup for as low as .10 per unit thanks to group purchasing power.
Nearly all major franchises, including McDonalds, Dunkin&#; Donuts, and Dickey&#;s Barbecue Pit, offer their franchisees group purchasing benefits.
Small retail businesses often gain customers through word of mouth, social media, perhaps with the help of bloggers and social influencers, and if they can afford it, advertisements in local newspapers and magazines.
Getting the word out about your business can be costly, but being part of a franchise business means benefiting from regional and national advertising campaigns.
On the local level, franchisors might help develop local marketing programs through a cooperative marketing fund, where franchisees can &#;buy in&#; using their own gross income.
This might include sales and deals that are only available at stores within an area, or special events that take place at specific locations. While national advertising increases brand awareness, local marketing drives customers directly to your business.
Perhaps the biggest benefit to opening a franchise is having a network of fellow franchisees that can provide advice and moral support. Because you&#;re all operating under the same brand, the success of one franchisee helps benefit the rest of its peers. You&#;ll know each other through the company network, maybe see each other at annual conference, and won&#;t feel as much like you&#;re doing it alone.
For franchisors, the list of benefits may not be as long, but franchising your business does come with some rewards. For one, franchising makes expanding your business and brand much faster than doing it alone. You&#;re using other people&#;s money, time, and effort to expand more rapidly, growing brand recognition, revenue, and the number of products you can sell. Also, startup fees and ongoing royalties help fund headquarter costs, the hiring and training of new employees, and large-scale advertising campaigns.
Similar to starting any retail business, the first thing is thinking about what type of company you want to own. Is it a fast-food operation or a small dry cleaning shop? Do you want to sell clothing and shoes, or perhaps your expertise is in furniture and appliances? Realizing where your talents, interests, and skills lie is the first item to consider.
You&#;ll also want to carefully study what types of businesses are in demand in the area where you reside. Sure, you might want to open a frozen yogurt shop, but if it&#;s cold and rainy for most of the year, a soup or hot sandwich business might be smarter.
Cost is perhaps the most vital item to think about. How much do you really have to invest? Is it $5,000, $50,000, or $500,000? Depending on the size and scope of the established retail franchise, you may not be able to afford the initial franchising costs of licensing certain brands.
Other costs that are important to consider include the following:
A number of websites offer databases of companies that offer franchise opportunities. This is a good place to get started if you&#;re just starting to brainstorm the type of business you want to open.
Many of the websites offer critical information such as the required financial investment and basic operating costs, as well as the size of the franchise, its history, and what category of retail it fits into.
Here are some websites to get you started on your search:
You can also check out individual websites of large corporations that have franchises and read their franchise inquiry or FAQ pages to help you gain insight into the company. Connecting with your local group of entrepreneurs and talking to business owners that have taken the franchising route is also helpful.
Retail franchising provides entrepreneurs the experience of owning a business without some of the mistakes startups often make. By using a proven system of operations, your business is much more established right off the bat and you can rely on support and advice from the franchisor and other franchisees to help you through tough times.
For those who enjoy the independence of entrepreneurship but thrive on being a team player, retail franchising can be a truly rewarding experience.
Retail franchising is a business model in which an individual or business, referred to as a franchisor, grants a license to another individual or business, referred to as a franchisee, to use its trademarked products, services, and brand. The franchisee then uses the franchisor&#;s business model to open and operate a retail store. The franchisor is typically responsible for providing the franchisee with business training and support, while the franchisee is responsible for running and managing the store. The franchisee typically pays a fee or percentage of sales to the franchisor in exchange for the use of the franchisor&#;s name, products, and services. In addition, the franchisee may be required to purchase certain products and services from the franchisor, as well as pay ongoing royalty fees.
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