To franchise or not to franchise?

in Managing by Mark Ivancic
(2 Ratings)

Buying a franchise is great if you lack experience running a business, but it may not be the most suitable business model if you want to go it alone, explains Mark Ivancic, Managing Director of Outback Steakhouse.

In order to become a successful franchisee in a competitive industry, you must completely believe in the business as a brand, have faith in the structure of the company and have a true desire to contribute to its improvement.

It’s also important to never lose sight of the fact that you’re one of many business owners who depend on the success of the brand. Although you may be working as an individual, you must also work well alongside others to contribute to that success. You play a part in ensuring that everyone is constantly driven to improve performance standards and rise above the competition.

Advantages of franchising over owning your own business:

  • It’s a great choice for those with less business experience as there will be a lot of lessons to learn from the franchisor and other franchisees

  • You have a network of people who can provide support in areas which may require additional expertise

  • Someone else has already proven that the business model is successful, which gives a franchisee greater confidence and the desire to invest and grow aggressively

  • You are not solely dependent on your own experience and skill like a business owner, therefore making a few mistakes is not necessarily business-threatening

  • Often, financing is easier as banks will look favourably on a franchise with good history

  • You may be offered exclusive rights to your area, which of course reduces competition and is a great help for someone new to running a business

The pitfalls of franchising:

  • You lack autonomy and may need to follow decisions that you might not agree with

  • There’s the potential that the franchisor doesn’t have the best people on board, which can create tension and stress within the group

  • You may feel that your skill-set and business experience is wasted and that you’d earn more on your own

  • The costs may actually be higher than you expect as there’s both the purchase and management service fees to consider

  • The business’ reputation depends on the other franchisees too

  • Worst of all, the franchisor may go out of business

Are you thinking about opening a franchise? Check out these tips:

  1. Believe in the brand and what it stands for – You’re relying on awareness of the franchise brand in your industry and offering products and services that consumers already know about

  2. Make sure the brand is aligned closely with your own principles and beliefs – You can’t represent or promote something you do not truly believe in as it may conflict with your own ethics. You will also have to abide by certain rules from above

  3. Get involved with a franchise that you can commit to financially and emotionally – It really improves your chances of success if you love what you do

  4. Be aware that others play an important role – The success of the business will rely on how well you work with others

  5. Assess your skills – The worst position to be in is one of frustration. If you believe that your money would be better invested in a higher risk business that relies solely on your skills, then you may feel trapped in a franchise

Find this helpful? You might also like:

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This article represents the views of the author only and not those of American Express.

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Mark Ivancic is the Managing Director of Outback Steakhouse; an Australian-themed steakhouse restaurant owned and operated by OSI Restaurant Partners in the US and other franchise agreements internationally.

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Poll Results

How many hours do you work on your business each week?

20-30: 18%
30-40: 18%
40-50: 23%
50-60: 41%