GET THE BUZZ
Thinking of buying or starting a business? Simon Lord shares ten B's on why a franchise could be your best financial option
People buy a business for all sorts of reasons: to take up a great opportunity; to be their own boss; to work with family or friends; to secure their future; because they’ve been made redundant; to move to a new area; to follow their passion; to buy a job; to create a new lifestyle.
Whatever the reason, one thing is certain: everyone wants their business to make money, not lose it – and that’s why choosing a franchise can make sense. Here are 10 good financial reasons for buying a franchise rather than an independent business.
If you run an independent business in New Zealand, you’ll soon find that there are only a few suppliers of the products or services you need – and, as an individual customer, you don’t have much negotiating power with any of them. That applies whether you’re buying office equipment, insurance, paper cups or lawnmowers.
As part of a franchise, though, you’ll be part of a bigger group of tens or hundreds of franchisees, and you’ll have someone negotiating with the suppliers on your behalf. Buying power is not all about getting the lowest possible price: it’s also about terms, marketing assistance and many other factors. A wise franchisor mixes all these elements to get the best possible outcome for the franchisee. That should result in better prices, better service and less stress for you.
That applies to marketing, too – as an independent café, you’ll never be able to afford to advertise on television, but join Columbus Coffee and you’ll find your latest menu items on TV and all over social media. Which brings us to …
Julie Evans was already a hugely-experienced hairdresser when she moved from the UK to live in Christchurch. Despite that, she bought a Rodney Wayne franchise – why? ‘The Rodney Wayne brand had huge longevity and respect, and I knew I couldn’t build “brand Julie Evans” to match that. It was a huge plus back then and I believe it still is,’ says Julie, who is now CEO of the franchise.
The value of a brand is not just that it puts a well-known name above your door – although that certainly doesn’t hurt. A restaurant called McDonald’s is going to attract more customers from the moment it opens than one called ‘Fred’s Burgers’, for example. More importantly, it tells people what they can expect. If someone wants their home cleaned while they are out, they will have more confidence in a franchisee from V.I.P. or Jim’s Cleaning than from someone they’ve never heard of. They know the franchisee will have been through security checks and have proper training and insurance before being allowed into their home, and know that they will have standards to maintain.
Cindy Buell of MRH, which owns the Mexicali Fresh and Burger Wisconsin franchises, puts it simply. ‘Joining a well-known brand enables you to ride the wave instead of trying to create the wave all by yourself.’
For most people, buying or setting up a new business requires some sort of funding – and this is another area where buying a franchise can make things easy. Finance providers know that franchised businesses often involve lower risk than independent businesses in the same industry, and banks with specialist franchise divisions have a good understanding of the various different models.
‘A good franchised business involves known financial inputs, including costs and working capital requirements, and good systems to help franchisees control costs and manage business growth,’ says Daniel Cloete, National Franchising Manager for Westpac. ‘That means we can much more easily structure appropriate finance packages for franchises than for independent businesses. Of course, franchisees need ...
Where are the rest of the 10 B's? This article appears in full in the most recent issue of Franchise New Zealand (Year 27, Issue 2) and can be read in our digital issue of the magazine, or ask for your own free print copy.
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