What is attractive about a franchise when such a lot of companies are available to purchase? November 5, 2009
Posted by janey in : business success , trackbackOne of the worst areas of any slump has to be the numbers of firms that fail. In a market like the one the world has experienced over the last eighteen months a number of factors have affected the capacity of organisation to continue to operate.
Firstly and most visible, the reduction in consumer spending, which has resulted in increased competition in the marketplace. Only the most effective businesses survive in this environment.
Secondly the lack of access to funds and resourses. When firms suffer cash flow or revenue problems then they rely on the Banks to grant funds to see them through. As we all are aware those funds have not been accessible.
The net result of these factors is that businesses are failing. When businesses fail they leave space in the market; requests for a product or service has not necessarily lowered just because a company providing it has failed. To start a new company in a recession simply re-providing a product or service needs funds or access to funds. If a new start up is funded by the owners then there is intrinsic personal risk in the possible failure of that company, and as we have already recognised support from the banks is unlikely to be forthcoming.
The other way of breaking into a market sector is through the acquisition of a Franchise Opportunity. Where there is a franchise for sale, there is the prospect to get into business with not as much risk.
Even where there is a Franchise For Sale there is some risk as the success of the business will depend on the skills of the Low Cost Franchise operator. That said the investment is preset and known and the market opportunities should be transparent as the owners should be able to demonstrate success in that particular market place.
Of course while franchises do provide a comparatively low risk entry they do have some issues which need to be taken into account, including a thorough evaluation of the Franchise For Sale and of the figures offered by the seller. Also, for a free spirited entrepreneur the opportunity may be a little constricted. A franchisor will expect the brand and product or service to be maintained, with very little space for self- expression.
There is also the issue of competition to be considered within the Low Cost Franchise itself, if it is a national business for example exacting boundaries will need to be enforced. All that said the Franchise Opportunity does offer a low risk, soft start in managing your own business.
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