If you are planning on venturing into the franchising space and have started conducting some research on the industry, how it works and the different franchising options it offers, you must have realised that you have the option to choose between a big brand franchise that has a global or national presence or one that is more niche in nature, has a presence in only a certain region or area and caters to a very specific demographic.
The considerations
Here are some of the aspects you should keep in view when choosing between investing in big brand franchise or a niche franchise and some of the things that you should focus on:
The entry cost will generally be much lower for the lesser-known and comparatively newer brands, as the franchisors will be far less likely to charge exorbitantly for access to their branding, training and intellectual property.
However any savings achieved in these various intangible aspects of the franchising offer may to a certain degree be offset by escalated store fit-out and equipment cost in comparison to more well-established brands. The latter always have more holding power and buying power and their construction efficiencies are better to keep their overall stores’ opening costs low.
In addition, the newer brands that are eager to create a stronger footing in the market will tend to position their franchising offer as a much more viable option compared to that of more well-established companies.
The other major difference is that the level of risk is far higher with the newer franchises than any established brands.
The former may still be honing their operating systems and also tend to have far fewer resources to channel towards franchisee training, quality control, marketing, ongoing franchisee support and more; and all of these are crucial to the long-term success of any franchising business.
The other differentiating factor is that when you opt to be part of a newer franchise, there is often a greater scope for new processes and innovation and the opportunities for growth are higher as well.
As a franchisee affiliated with a lesser-known brand, you can use your growing business skillset and operational knowledge to design and capitalise on various growth opportunities to expand the brand reach of your business.
There are stories of enterprising franchisees that have worked diligently, moved out of their comfort zones, innovated and created inroads into the industry and eventually turned into franchisors themselves.
Growth into more outlets will often also be possible in the better established brands too; however, the possibility of being able to actually influence the overall direction of that franchise, or even of buying out the franchisor is significantly lower in more expansive and established systems.
And in determining whether you should invest in a relatively newer franchise, compared to a well-established brand, you need to assess various factors such as your ability appetite to take on risk and to capitalise on any opportunities that come your way.
It’s true that franchising is generally looked upon as a far safer investment than any independent business, but you shouldn’t be under the impression that it’s entirely risk-free. It’s crucial that you take a 360 degree view of the situation, understand and study all potential risks, consider your current financial and personal situation, before taking the plunge.
If you want to know more about setting up a franchise business or want some advice on franchising, feel free to get in touch with us at The Franchise Institute. You can call us on 1300 855 435 or fill in this contact us form and we’ll reply as soon as we can.
Thanks for reading, The Franchise Institute Team 1300 855 435
