If you are a budding or experienced entrepreneur, it’s likely that you are always on the lookout for the next big thing. Start-up franchises seem like the perfect opportunity to become involved with a business from the outset, and it might even be the next ‘unicorn’ (a privately held business worth over $1 billion) . A startup franchise allows you to experience immense growth and shape the operations and values of the business as a whole. However, like all businesses, startup franchises do have their drawbacks. In this article, we look at the pros and cons of startup franchises and how to assess whether this brand-new venture might be the right opportunity for you.
What are the benefits of becoming a startup franchisee?
The benefits of becoming a startup franchisee are plentiful. Firstly, startup franchises typically come at a much lower investment than well-established businesses. When you join a franchise that has not yet established itself on the marketplace, the costs will be lower than if you were entering a company that is a household name. Where you have conducted significant research and believe the business has the potential for growth, this could be an excellent investment.
Furthermore, where you come on board as a franchisee early in the lifecycle of a business, you may have a more significant influence in shaping and building the business. Many startup franchises are very open to the input of franchisees in these early stages. After all, franchisees are the people who experience the day-to-day running and challenges of the business. Franchisees see the real customer or client problems or barriers to sales, and as a result can provide excellent insight into how to improve processes, operations, product and brand.
Even where the franchisor has planned for almost every eventuality, it is only through operating the various branches of the franchise that unforeseen circumstances and difficulties may come to light. Start-up franchisors must work closely with their franchisees in the early days to iron out these teething problems. This can be exciting as a franchisee, as you feel like you are really shaping the direction of the business and that your input is truly valued – which is often not the case in more extensive, well-established franchises.
What are the disadvantages of joining a startup franchise?
While the investment for joining a startup franchise may be lower, there is, of course, a reason behind this. You are taking a risk on an unproven business opportunity. There is no established market for your business in the area, with customers unfamiliar with your offering and brand. It is vital to carefully consider whether this opportunity has the potential for profitability and growth. However, don’t be put off joining a startup franchise, as the benefits often significantly outweigh the drawbacks. The most important thing is to carry out adequate research to ensure you mitigate the risks and make the right decisions for your circumstances.
Like starting any new business, even where you have created projections about growth and profitability based on figures and statistics, these are yet to be proven by the actual running of such a business. Only starting business operations can confirm whether the business will succeed. However, what you can do is take steps to mitigate the risk of failure. This involves meeting with the franchisor, carrying out your own research and getting a good understanding of the proposed franchise agreement which dictates the relationship between franchisee and franchisor. You may even wish to get professional advice on the opportunity.
How to assess a startup franchise opportunity
Here are some key questions you will want to ask to assess whether a startup opportunity is viable:
- How is the franchisor funded? Can they support the franchise?
- Will standard processes and systems be in place across the franchise? What are they?
- Will the franchisor provide adequate and ongoing training, resources, marketing solutions, figures and data from the outset?
- How available with the franchisor be? Will they be there to answer questions, deal with difficulties and closely communicate with franchisees?
- Will the franchisor continue to oversee the smooth running of the franchise as a whole?
- What are the plans for the future growth of the franchise?
Do you think a startup franchise might be the right choice for you? Browse some current franchises for sale.