The independent business vs franchise: what are the risks?

While a franchise does not guarantee success, nor should be regarded as a business concept as a “magic bullet” will solve immediately or increase their financial situation, definitely the possibility of failure is much lower than representing open and operate an independent business, although the characteristics of the concept are very similar to the operational structure of a particular franchise, or have the means and suppliers enough to compete.

The explanation is very simple: we must remember that a franchise is not just a business model or marketing strategy and growth, but also is the result of tests, successes, setbacks, market research and competitive intelligence, experience and position or brand recognition has been gained through a persistent struggle to get a name and prestige.

There is no doubt that a skilled person, entrepreneurial, creative, full of excellent ideas and looking forward to having a business achieve its goals achieved, moreover, that an independent business in no way implies a certain failure.

However, we must remember that all franchised businesses that today are widely recognized, have traveled that road and have learned the basis of high and low to overcome obstacles and build a solid operational and administrative structure and tested.

For this reason and in the course of this long road to travel, the lack of a mark in position, the lack of experience, lack of support from a corporate to administer and provide technical assistance to a network of units and the learning curve, mean difference and an important risk factor.

The reasons for the fees

Just a franchise fee means the right to use a mark, the transfer of knowledge (know-how), assistance in locating and / or approval of the appropriate location, delivery of operational and administrative manuals, induction and initial training and general technical assistance in the pre-opening. While royalties translate into support and ongoing support (consultancy visits, training and updating, new strategies, procedures or technologies, supplies at the best market conditions, etc.) Always bearing in mind the philosophy of win-win -Win (Client-franchisor-franchisee).

There are also contributions that the franchisee must make to the development and implementation of marketing strategies and advertising to local and institutional level, in order to position and increase the presence and image of the network to the market.

The reality is that having a strong brand and recognized in the market, makes a big difference since day one. When a recognized brand opening a new branch, the market is already familiar with the brand, know the products and / or services with which this account as well as their prices. There are no unpleasant surprises. This phenomenon accelerates the recruitment of new customers and significantly increase the short-term results, shortening the time of return on investment.

A simple comparison

To clearly understand the difference and only as a comparison, we could say that an independent business is similar to traditional postal service, in which the share is lower than that of a parcel and courier service, in which the delivery time is greater we do not know the route of delivery and where there are many risks that fail to reach its destination.

For its part, the franchise, is like a parcel and courier service, which actually has a higher cost, but it most certainly know the delivery time (which will be significantly lower relative to you would do with the traditional service ) offers online tracking service by telephone or directly at each office (TA) and unanticipated risks that could cause delay or loss are significantly lower.

In conclusion, the excess is no better than the independent business and franchise; however, the Franchise is a joint effort to minimize the likelihood of risks and failures, in which the learning curve is greatly reduced.