There is an increase in recent years of people working for themselves rather than for someone else. The economic recession is partly responsible for this as many people have lost their jobs. With some money saved, the unemployed have become entrepreneurs. They are now their own bosses. They may have bought an existing business, started a new one, or bought a franchise. Entrepreneurship and being a franchisee have many similarities as this article will point out. The advantages and disadvantages of being a franchisee are also discussed.
An entrepreneur is a business owner or manager who accepts financial risks through new ventures or opportunities. You have the entrepreneurial spirit if you desire to create something new, to improve an existing business. In short, you are creative, innovative and enterprising.
A franchisee, on the other hand, is one who purchases and runs a franchise. A franchise involves a licensing agreement or right granted to an individual or group (franchisee) to market the parent company’s (franchisor) products or service within a specified area. The franchisor conceptualizes, develops and perfects a business concept that is sold to a franchisee. The franchisee operates a business that is controlled by the franchisor. He or she uses the parent company’s trademarks, name and logo; follows guidelines set by the franchisor; and pays an ongoing franchise royalty fee for these rights.
Advantages of a Franchisee
If you are a franchisee, you have a better chance at success because –
- You are selling products or offering services of an established company with brands, logos or trademarks that are already known to customers.
- You are utilizing a proven system of operation.
- You and your staff get training and ongoing support from the franchisor.
- You are assured of territorial exclusivity by the franchisor
Disadvantages of a Franchisee
Among the downside are –
- The purchase price of a franchise is usually higher than the cost of starting a new business.
- You have to pay ongoing royalty fees during the lifetime of the franchise agreement.
- You have to strictly comply with the system controlled by the franchisor. You have to use the system as directed.
- Your creative or innovative wings are clipped.
Yes, a Franchisee is also an Entrepreneur!
- You conduct market research to find out which business is likely to succeed; which industry is saturated; where to put up a business. You review financial documents, feedback and reviews, and marketing reports about the business or industry in question before buying a franchise.
- You have an entrepreneur’s outlook. You share with the franchisor knowledge of your specific territory.
- You see a business opportunity and act on it – by buying a franchise.
- You take a risk by buying into a franchise system although your chances of success are higher.
- You use your management skills to hire and supervise employees, and you review accounting records. Even if you use someone else’s system, you are still responsible for operating your own business. You attract and retain customers, and establish financing relationships.
- You make business decisions such as loan terms, lease contract or real estate purchase and purchases, among other important decisions. You make business decisions everyday.
- You are also concerned about financing. You pay the lease, hire workers, buy supplies, etc. You seek investors or acquire loans for your business.
Like an entrepreneur, a franchisee does all the above entrepreneurial functions.
Being a franchisee is an excellent way for an individual to own and run a business. If you are considering buying a franchise, you use your entrepreneurial skills. Do your homework, research and investigate. Choose the industry you want to get into based on your background and experience. Weigh all your options – the advantages and disadvantages – before making a decision.