Starting your business or buying a franchise?

A franchise can be a good option for those entrepreneurs who find starting a business particularly complex and above all the uncertainty of whether that idea that is undertaken will be liked in the market, a situation that does not happen in the franchises where its success is proven. On the other hand, starting your own business can be a more attractive option for those who want to have total control over the operations from the first steps.

Before taking a step forward, you should weigh the pros and cons to avoid common mistakes associated with starting a business. Starting your own business or buying a franchise? Here are some tips to help you choose the option that best suits you:

Brand awareness

With a franchise, the brand is already established in the market and the level of success and recognition by the market is already known.

When you start your business you risk creating your own brand, as it must be the right one for your new business. It is preferable that you hire a branding expert to advise you and develop the best possible brand, as this element is fundamental to the success of the company.

Teams and suppliers

A franchise comes with an established business model, so there is no need to negotiate with suppliers, create brand image etc. . You will have more support than an individual business owner and will receive things such as training, marketing assistance and general corporate support.

However, while some enjoy the security and ease that this scheme offers, others prefer to be innovative and take their own creativity into their own hands. Therefore, if you are a highly creative person full of different ideas and want to make these ideas a reality, then you should start your business. But you must elaborate a previous business plan that guides me the steps to undertake your idea.

Recurring costs

As for the costs of one model or another, we can not say that the franchise or the business itself is cheaper than another, this will depend on the franchise in question and the idea to be undertaken. If it is vital to get the numbers right, compare them and see the pros and cons of one model or another. It must be taken into account that not all franchises are the same. So the franchiser, in addition to the initial investment, has to make a series of payments, such as

Membership fee: usually a single payment for the transfer of the brand and know-how.

Royaltie: Periodic payment either monthly or annually for the service provided by the franchiser (creator and owner of the brand) and for the advice he gives. These royalties are usually a percentage of the turnover and not all the franchised ideas require it.
Fee for advertising or marketing: it is usual to pay a percentage on sales or a fixed fee, destined to cover the advertising and promotion campaigns of the whole group or network of franchises.

Freedom

By starting your own business you will have more control over all operations and the direction you will take.

In a franchise you will always be subject to the decisions of the franchisor, and therefore, you will have less freedom to decide how much to invest, where to open your business, what equipment to buy and to try out your own ideas.

Future expansion

Starting a business from scratch is a challenge that, in many cases, involves great risk, but the potential is infinite. When you are independent, there are more possibilities to expand and control how much and how to invest. For example, if cash flow is slow, independent entrepreneurs can delay expansion plans or limit the scope of new projects.

A franchise can grow only to a certain extent, however, there is no limit to the growth of your own business, of course, if everything goes well.

As you can see, there is no sure answer about which strategy is the best, this will depend on the business model and your company’s philosophy about what you want to achieve. A careful and thoughtful analysis of your personal goals for establishing a business should help you decide on the type of opportunity that is best for you.

It is true that franchises exist in practically all activities, but that does not mean that the company of your dreams will find the ideal model in one of them. Likewise, what you plan as your own business may be a better fit, with a greater chance of success, in the form of a franchise.

Whatever your choice, if you must have a good business plan, which contemplates a serious strategic plan with the aim of reducing as much as possible uncertainties and avoid improvisations of any kind and that allows you to face different scenarios.

Reasons that make the laundries profitable

Why do laundromats offer a great business opportunity?

Self-service laundry franchises have become strong competitors in the domestic washing machine sector, because top companies like Bloomest can offer extremely attractive results, prices and washing times. The self-service laundry sector already has a turnover of between 70 and 80 million euros in Spain, according to data from 2016.

According to various sources in the sector consulted by Agencia Efe, there are currently around 1500 self-service laundries operating throughout Spain, and this number continues to grow, due to the demand for the service. The percentage of businesses in this sector that have been successful shows their profitability. There are strong reasons why these businesses are profitable franchises. We will see some of them below.

Causes of the profitability of coin-op laundries

They are included in the low cost franchises. The self-service laundry franchises require a low initial investment, which makes them accessible to a large number of entrepreneurs. Indeed, the initial investment is one of the factors why many people dismiss the idea of starting their own business, and coin-op laundromats offer a coherent and possible option.

They generate income from day one. From the moment it opens, a coin-operated laundry begins to bring in funds, as customers pay on the spot for the service they receive. It is an inexpensive service, which does not require financing and is affordable for various personal and family budgets.

Low outlay for fixed costs. As it is a business that is practically self-governing, it avoids the costs of hiring and maintaining staff. One person can easily run a business without having to spend long hours managing it.

Possibility of extensive opening hours. By virtue of the characteristics of this service, strongly demanded by workers with different schedules, the opportunity to have the premises open 24 hours achieves a greater reception of users. As a company manager, bear in mind that if the premises allow it, you can add vending machines, and you would be a great complement to the excellent service of your coin-op laundry.

Changing habits in contemporary life. Long working hours, the desire to reduce the time and work of domestic tasks and the reconciliation of family life are aspects that lead to the regular use of the coin-operated laundry service. As if this were not enough, doing your laundry in a coin-operated laundry saves money, another advantage for this type of business to attract more and more users and, therefore, offer profitability in a short period of time.

Keys to the success of a franchise

The franchise sector is growing at a high speed and this same growth has caused many entrepreneurs to consider that their business model can make a leap to expansion and do it hand in hand with this associative format. It is true that this is the first step, but it is also important that before franchising a business, a detailed evaluation of the franchisability elements of the brand is carried out by an expert consultant in franchises.

Without a doubt, the franchise model has proven to be one of the most buoyant business development models today. Its formula allows for a significant reduction in the risk of failure in the first years of operation, compared to a business that was started independently. Last year, according to figures from the Spanish Association of Franchisers (AEF), there was a growth in franchised premises with a figure of close to 5,000 establishments, which shows the good market prospects for franchising a business.

However, we cannot affirm that these figures of the sector are a product of good luck, on the contrary, the franchise market has matured in such a way that every day new models appear and the already existing ones are consolidated and this is because it has known how to develop some key factors that have allowed them to achieve success.

In general, we can say that the keys to success of a franchise are based on the following factors:

Definition of the business model

When deciding to franchise a business, it is important to establish the strategy on which the development of the business will rest. The business model must be attractive for investors who want to open a franchise but also profitable for the central franchisor who develops it. When a model has clearly defined the key elements on which its strategy rests and the way to position itself and make money in the market, the chances of failure are reduced to a minimum. It is here where the experts in franchising use all their experience in the development of consulting projects for business models that have been successful in the market.

Market

How is the market that I am going to attend? Is it a little developed market niche or on the contrary the competition is strong? How big is my market? are some of the questions that must be answered when introducing a product or service in the market and developing it in franchise. Somehow the franchise headquarters must have a market size attractive enough to develop a successful franchise point.

Know How

It is one of the essential elements of any business model, it is the personality of each concept or brand, of how to do things and how to make them work. A successful franchise is because it has managed not only to have clearly defined the elements of its know-how but also (and I would add that more importantly) has known how to transmit it to its network of franchisees.

Expansion plan

A business model that wants to be successful must know where it wants to grow and also the actions it must take to meet these objectives. It is about defining the direction and intensity of the expected growth and being clear about which markets offer the greatest guarantees of success when opening a franchise. A successful brand must be able to tell its potential franchisees which are the best areas for the development of the brand.

Marketing

There are many business models that have failed because they failed to effectively communicate their business model to both their end customers and the investor market. In this, the different marketing actions play a very important role in order to achieve a high positioning of the brand and its consolidation in the market. A successful business model must have an effective and proven marketing plan and work hand in hand with its franchisees before, during and after opening a franchise.

Network development

Little can be achieved with a business model where the franchise centre is not capable of growing the network. One thing is to grow in the number of stores or establishments, which is very good, however, it is equally important that the network that has been built around the franchise is consolidated every day. Elements such as: communications, innovation, added value to the business, are the main basis for maintaining a healthy franchise relationship and therefore have a guarantee of permanence and success in the market.

Franchising is certainly a path to commercial success

The attraction of entrepreneurs and business people from all over the world to this system is easily understandable. This is clear from the statistics that, both at national and supranational level, show the settlement of this form of retail trade. In Spain alone, there are about 9,000 openings per year. In other words, a franchise is opened approximately every hour.

Franchises fail less than traditional trade

The numbers speak for themselves. While traditional commerce has a fairly high mortality rate (a high number of businesses do not stay open for more than two years). Franchising has much more favourable ratios (only 5 – 7% of franchises fail).

With these numbers it is more than logical that in countries like the USA the percentage of trade that moves through the franchise is over 50%. While in environments like ours it is around 10%, although with a marked and constant upward line. In fact, there are sectors in which the franchise is beginning to have an overwhelming predominance and an increasingly strong presence. Dry cleaners, courier services, cafeterias, fashion and fast-food, to name a few of the most representative.

These facts are not the result of chance but of a job well done for years, of a constant research and aimed at being more competitive in an environment that demands it. And, above all, of the constant investment in creating strong brands, recognized and demanded by the public. The latter, the brand, is the main asset of the franchise. And it is the fundamental reason why customers approach them.

Two advantages over the independent business

The decision to become a franchisee is usually the consequence of two advantages offered by this system. And that stand out from all the others. One of them, as we have just seen, is a spectacular reduction in risk compared to establishing oneself independently.

The other, also important, is the significant time savings in the development of a business (between two and six months) since everything is provided perfectly standardized. The advantage is not only that everything is perfectly studied, down to the smallest detail, but also that it works.

Let’s remember that someone “knows how to do things” because that is the key to everything. If a franchise does not provide this know-how, it is not worth betting on it. If the franchise presents advantages compared to the trade initiated in its own name, we should not renounce to obtain those advantages.

The advantages of franchising

Running your own business is the cornerstone of the American dream. Those with a unique business idea and the right amount of drive and capital tend to build their own company from scratch, while others prefer to enter the business arena by purchasing a well-established franchise.

A franchise is essentially opening a store while using the name and resources of an established brand for profit. A fast food chain is one such example of a franchise, from McDonald’s to Burger King. Usually, the person who runs the business, i.e. the franchisee, has to pay a start-up fee to the brand to run its operations normally and provide the necessary supplies.

There are two types of franchises: product and trade name, or business format. With the first, the franchisee acquires the right to the original company name and trademark. Let’s talk about the commercial format, where the franchisor offers complete products and services.

Advantages of franchising

The appeal of a commercial format Franchising is understandable. FRANCHISING allows aspiring entrepreneurs to start a new business without incurring the same level of risk as a completely new company. You can easily change careers by changing industries, which is now commonplace for most entrepreneurs. Such a benefit is excellent for people looking for a fresh start and for learning from their predecessors.

The business is already established. There is very little ground for a novice entrepreneur to break through. The brand, operating traditions, and products or services are already in place, along with loyal customers. All that is new is the location.

The key business relationships already exist. Most franchisors have existing relationships with suppliers, distributors and marketing companies, from which the new franchisee can benefit while learning the ropes. They may know how many products to order and what advertising to use for new campaigns. They can also determine what is a fair price to pay for the supplies you need and how to make a profit.

A support system is in place. A new business owner has a lot to learn and mistakes can have serious consequences. Many franchisors, to preserve the integrity of their brand, prepare franchisees for success by training them on how to properly manage sales, purchases, advertising and more. Everyone benefits if the new franchisee makes a profit. Therefore, they have the greatest incentive.

Easier financing helps you get started. When you are buying a franchise, acquiring the necessary capital tends to be easier. An established brand and existing infrastructure make the business less risky for investors.

You can also open the store sooner and start accumulating income. Franchises take less time to open than individual businesses, usually requiring a maximum of one year. In contrast, a one-man business may take more than a year to start, without a suitable model. Time is money in many industries, and you’d rather be efficient than not.