Opening a franchise: advantages and disadvantages

27 September 2023

According to the 19th annual Banque Populaire Franchise Survey, conducted in partnership with the French Franchise Federation and Kantar, of the 34% of French people who want to start their own business, 44% are considering franchising as a way of doing so, proving the attractiveness of the model. However, not everyone will find what they’re looking for, and to weigh up the pros and cons before taking the plunge, it’s important to know the pros and cons of franchising.

When you think about setting up your own business, franchising quickly comes to mind as an attractive model… But why? What are its advantages? Does the model really have only advantages? Is it for all entrepreneurs?

Franchising saves time and reduces risk

By joining a franchise network, the entrepreneur becomes independent without being alone. Of course, he becomes a business owner, but he will be supported from A to Z, every step of the way, unlike a sole trader. This will save him an enormous amount of time, and limit the risks involved.

In fact, it reproduces the model and applies the codes of a concept that has already proved its worth. Franchisees benefit from a number of advantages:

  • Visibility, brand awareness and image
  • Arguments for obtaining financing from banks
  • Franchisor know-how and support
  • Management and communication tools (media, graphic charter, etc.)
  • Being listened to and advised by the franchisor’s team, as well as by other franchisees
  • Group synergy, pooling of resources and economies of scale
  • The network’s innovative products and services

In this way, the franchisee is not going in blind. By joining his brand, he obtains the keys to repeat a pre-existing success. They even have the opportunity to learn a new trade, thanks to the initial training offered by the franchisor. After all, it’s easier to apply a concept in an unfamiliar, or less familiar, sector than it is to give up long-held habits developed over the course of a professional career.

Growth is faster than when working alone. If the entrepreneur so wishes, he can even open several outlets, as multi-franchising is encouraged in many chains. Lastly, recent years have also shown that franchise businesses are more resilient in times of crisis. Both in 2020-2021, during the Covid-19 pandemic, and for over a year now with inflation, having a network behind you is proving to be an invaluable asset.

Nonetheless, some project owners aspire to greater freedom. For them, these many advantages are not enough to offset the model’s drawbacks.

Franchising: not for everyone

Setting up your own business often goes hand in hand with a desire to “become your own boss”. For some independent entrepreneurs, however, the framework imposed by franchising seems to somewhat undermine this desire.

Indeed, all or part of the know-how shared by the franchisor is non-negotiable under the franchise contract. This can be frustrating for the franchisee, who sometimes sees the situation as a loss of freedom. The same goes for regular feedback on results. The choice of suppliers, or for a potentially innovative idea that needs to await the franchisor’s validation before being tested or applied.

In franchising, the entrepreneur can’t do what he wants when he wants. He must be aware that it is the homogeneity of practices within the brand that will guarantee the smooth running of the whole.

Other disadvantages inherent in franchising can put entrepreneurs off. This is particularly true of financial constraints. On the one hand, the initial investment is higher, since in addition to the costs of setting up the business, there are the network’s entry fees. On the other hand, franchisees must then pay royalties to enable the group to operate, either in fixed amounts or as a percentage of sales. These additional costs are specifically linked to franchising and must be taken into account by the entrepreneur, who may sometimes see them as a hindrance to his project.

Finally, the franchise contract also sets out the conditions for transferring the business. Pre-emption or approval clauses enable the franchisor to have a say in the buyer’s decision, or to position himself as the buyer, in the interests of the network. But for the former franchisee, there’s also the risk that the transfer may take a little longer than expected.

Franchise, franchisee, franchisor: a matter of personality

So it seems that the choice of a franchise depends above all on the personality of the project owner. Does he need complete autonomy to set up his own business? Is he ready to comply with the network’s requirements and conditions? Does he have the collective spirit, the network spirit, to launch himself alongside a brand?

If the answer is yes, you’ll need to think even harder, because, in addition to a concept, the candidate is choosing a franchisor and his team, with whom he must be compatible. Franchising may be an entrepreneurial adventure, but it’s also a human one, and relationships are at the heart of a company’s success. It’s essential to take your time to make the right choice!

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