franchising aspects Jul, 16 2010

Avoid misleading misconceptions while franchising

Franchising is increasingly becoming dearer to entrepreneurs in India. However, aspirants are still apprehensive to take up franchising pertaining to the misconception attached to it.

By Ramanjit Kaur
Feature Writer
Avoid misleading misconceptions while franchising

Franchise industry has observed steady growth in India during the past few years. As per the figures available, the Indian franchise industry has grown 30 to 35 per cent approximately. However, it has still not reached to the mass level. The most significant factor responsible for this restricted growth of franchise industry is the widespread misconceptions attached to the franchising concept. The article elaborates on the various preconceived notions about the franchise model as a result of which the aspirants fear to venture into this field.

Misconceptions about franchising

Here are enlisted a number of myths associated with franchising that needs to be rejected at face value in order to avoid a golden opportunity to get started with a tried and tested business concept.

  • Experience a must: Most of the entrepreneurs think that a franchising business requires at least some experience to attain success, which is not at all a necessity. As R Inder Bhalla, MD, Cocoberry, “We want our franchisees to have good educational and a sound financial background. The food & beverage industry knowledge can be an added advantage though it is not a necessity.” Relevant experience can only add on to the possibility of getting success. The franchisors and their staff provide all the necessary hand-holding to the new franchisees in order to ensure proper franchise operations.
  • Restricted ownership: It is often believed that the framework of the business, such as the cost, long working hours, and suppliers are handled and monitored by the franchisor, whereas finding the location, recruitment of the staff, and promoting the franchise locally is taken care of by the franchisee. This restricted ownership holds back aspiring entrepreneurs to take the franchise route.
  • Creativity at risk: Aspirants usually have the notion that a franchised business confines the creativity of its franchisees, which is wrong. Chetan Maini, Deputy Chairman and CTO, REVA says, “An entrepreneur should never stop thinking of ideas, be passionate about your unique proposal and strive to be persistent in overcoming hurdles and challenges to ensure your ideas are successful.” Most of the franchisors are keen to add new and fresh concepts to their business and they are always open to new ideas from their franchisees.
  • Costly affair: Entrepreneurs often have this misconception in mind that franchising is a costly affair. But this is not the case with every franchise business. However, the franchisee fees and other hidden costs charged by the franchisor are worth once the break even period is achieved. Moreover, these days, the franchisors are even ready to help franchisees in procuring bank loans for financial assistance.
  • Guaranteed success: Aspirants believe franchise business guarantees success. No business can ever guarantee success. Although the risk of taking up a franchise is much lower compared to an independent business. A number of factors like market conditions, efficiency, location, and knowledge of the franchisee are responsible for making profits.
  • Franchisor accountable for success: Aspiring entrepreneurs believe that taking franchisee means the entire responsibility for their success lies with the franchisor as they have put huge amount of money. However this is not true. Franchisor is only accountable to a certain limit. It is in fact the franchisees who have to take care of the nitty-gritty of the business.
  • Franchisees get to enjoy the pie: No doubt, the franchisor provides all the required training and support to his franchisees during the initial phase of business establishment. But the success of the franchise depends on the dedication and commitment of the franchisee. As per Chandan Savera, General Manager (Retail and Marketing), Creative Portico, “We want an active participation of our franchisees to deliver the best to our customers.” The franchisor can only provide the basic know-how of the business but the intricacies (such as money, marketing, customer satisfaction) involved in it must be taken care by the franchisee himself.

Myths about franchising if understood well can reap high benefits for the aspiring entrepreneurs. Franchising offers innumerable benefits over independent businesses. It is a viable option for an aspirant looking for a start-up and can spell success if the franchisee has a right combination of three R’s. Let us have a look:

  • Research: It is the first step that decides the fate of your franchise business. A franchisee needs to spend enough time in digging out the detailed information of the franchisor and his franchising business. A franchisee need to build a comprehensive information about the franchise, the franchisor, products or services, before zeroing down the franchise offer.
  • Realism: Being a franchisee, you should be realistic in your approach while getting started with a franchise business. You should carefully assess the strengths and weaknesses of a franchise business and accordingly decide whether you really have the frame of mind to keep your customers happy and satisfied.
  • Resources: It is the duty of the franchisee to manage his resources while living within the franchise system. The resources can be the funds to pay the royalty on time, purchases and payrolls. Delay in handling this area can lead to dire consequences that will ultimately affect the business.

In short, get familiar with the nuances of the business and the way it operates. Only then you will be able to enjoy the benefits of franchising.

Related: Strategic Keys to Franchise Globally

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