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Why joining hands with a Franchise Chain,is better than going solo ?
Franchise as a concept has gained a lot of traction worldwide post World War 2.
There are a lot of advantages in going for a franchise –
1. Save on the cost of learning– any new business takes some time to settle down. If the owners are not from the same line of business, there are high chances of making costly errors in running the operations. Association with a franchise, however mitings this risk to a big extent, though does not remove it completely.
2. Access to operational processes / software etc- a franchise chain will almost always have systems which are safe and scalable. Scalability is a big issue in today’s business environment. Once the business grows, the systems should be able to take the load in a seamless way. Safety of the data is another important aspect. If we consider a situation where a business is going solo, then a lot of times, requisite knowledge is not available with the promoters of business. An example can be taken of the SME business segment in India. They did not have the scale or the systems and when GST was introduced nationwide, they were caught on the wrong foot.
3 . Marketing insights and brand building – the owner at his level does not have to invest time and intellectual capital in creating new brand specific communication. The franchise usually handles it for them at the group level and if the need arises, customisation is done too.
4. Standardization , resulting in higher trials and footfalls
5. Maintenance of service standards – since the chain already has a predefined level of minimum standards to be maintained, the end users experience a sense of comfort. Franchisee partners of lot of salons and food chains like Haldiram take advantage of this fact. Had they been on their own, it is difficult to say if they would have experienced the same growth.
6. Quicker ramp up – associating with an established brand helps reduce the time to maturity due to the homogeneous experience provided to end users across the chain.
7. Due diligence and projected cash flows – most franchise companies share a DPR – Detailed Project Report with the franchisees before the start of business. The report is conducted by specialists working for the Franchise and the data so shared provides a realistic picture of the proposed business. The data shared is usually quite realistic as the Franchise has assimilated this over a span of time and geography. On their own, it gets difficult for the promoters to project a realistic estimate as they usually do not have access to past history and trends, to base their estimates on.