Franchise Q&A
David Glover
Franchise recruitment manager, Caremark
A: Buying into an established brand has many obvious benefi ts for a new franchisee and overall would seem to hold less risk than investing in a newer franchise just entering the market, yet there are benefi ts to be had from both ends of the spectrum.
An established franchisor off ers a proven and successful model across multiple locations, which will have been adapted and developed over a period of time, therefore off ering a more robust investment than a newcomer’s untried model. The experienced franchisor is also able to attract franchisees through the strength and reputation of its brand and its network of successful franchisees. Any new businesses, therefore, will benefi t from the brand awareness and traction built up by them. Also, when it comes to fi nancing your investment, banks are likely to lend on more favourable terms to a proven franchise.
Having access to good support is important for most new franchisees. A mature franchisor will have a dedicated team of skilled professionals available to guide and advise new businesses from day one onwards, giving you the best opportunity to grow your franchise
as quickly as possible. In addition, your business plan will be founded on realistic projected revenues from the franchisor and other franchisees. Yet there are advantages for opting for a new franchisor. A discounted initial fee may be off ered to attract new investors which presents considerable upfront cost savings and, of course, there is also the benefi t of having a wider choice of territories, rather than taking ‘all that’s left’ with a mature franchisor who may have sold many already. Being one of the fi rst franchisees you benefi t from being ‘a big fi sh in a small pond’ thus receiving a disproportionate amount of support compared to an established franchisor. A newcomer franchise will often be
prepared to negotiate in respect of the actual terms of the franchise agreement since they will be keen to recruit new franchisees. Consequently, you may be able to negotiate signifi cant concessions that you couldn’t otherwise with an established franchise operation. Whichever option you choose, there
are benefi ts to be had, depending on what you are looking for, but it is always worth weighing up all the pros and cons before signing on the dotted line.
February 2017 |
BusinessFranchise.com | 17
Q: What are the main differences between investing in an established brand and in a newcomer to the market?
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