Franchising Aspects Nov, 22 2010

Novice Franchisors Can Be Profitable Too

When given a choice an aspirant would always prefer to take up the franchise of an established brand over a debutant. However, a debutant franchise can also prove to be equally opportunistic for the aspiring entrepreneurs

By Pallavi Majha
Chief Sub Editor
Novice Franchisors Can Be Profitable Too

Franchising undoubtedly is the best model for business expansion, but as success is guaranteed neither with a popular franchise nor with an evolving one, then why not consider taking up the franchise of an evolving franchisor? No doubt, taking up the franchise of an established brand provides numerous benefits to the franchisees, but a franchise of an emerging brand too has its own share of benefits. However, selecting a suitable franchise is often a rigorous task for the aspiring franchisees. Logically, partnering with an established company is safer than partnering with a new franchisor for reasons like experience and support system. But, rejecting a new franchise for the sole reason of its being new may devoid the franchisee of a lucrative opportunity.

Be a privileged initial franchisee

As going by the popular trend aspirants are generally reluctant to partner with new franchisor. Supporting the above Meenal Jain, Franchise Head, Kids Gurukul says, “Yes, people are reluctant to take up a franchise of an evolving franchise brand. When we contact aspiring franchisees they ask about the exiting number of franchisees and about the years of experience we have in franchising.” Unquestionably, a successful franchisor gives the franchisee a well-known brand name, which acts as a perfect beginning for a franchisee’s career, along with adequate training and support with the security of an ensured break-even period. However, an evolving new franchisor also has lot of advantages for the aspiring franchisee. These are:

Concentrated attention: Evolving franchisors and their corporate staff generally devote more time, attention and support to their first franchisees as success of a first time franchisee is critical for the success of the franchisor also. In this way, franchisees get the first mover’s advantage and often get the most important position in the franchise network.

Fresh concept, an added advantage: First franchisees benefit more if the franchisor has launched some fresh business concept. After sometime the unique concept may become stale and might reach its saturation point with lots of other companies following suit. In this context Jain, says, “We did not face much problem in convincing the aspiring entrepreneurs as our franchise concept is absolutely new and unique with lot of growth prospects.”

Close association with the franchisor: Being the first franchisees, one is in a position to recommend or initiate changes in the franchise system. New franchisors heed the advices of their franchisees and can implement the changes in the product or concept.

Becoming a master franchisee: Taking up the position of a master franchisee or an area developer is beneficial to the franchisee, which is possible only in case of developing franchisor. Moreover, he can open outlets at prime territories and localities. In an established system, existing franchisees may have already taken those prime locations, and you being the newcomer may not get the opportunity.

Flexible terms and conditions: To encourage prospective franchisees to come on board, new franchisors are more flexible in terms of contract terms and fees. With the help of a franchise attorney franchisee can negotiate on many terms and conditions.

Gracious offers: Being a partner of an emerging business may give an opportunity to avail some complimentary offers from the franchisors in the form of discounts in investments and royalties.

Word of caution

With all the privileges of being attached to a developing franchisor, certain things need to be taken care of. These are:

Checking franchisor’s credibility: Before partnering with any franchise company, it is not possible to recommend or to check the credibility of the brand and the franchisor. A S Ganesh, MD, Kids Gurukul highlights, “We did not face much problem in hiring new franchisees as we already had four company owned centres which were running quite successfully. Also our concept was new and unique and aspiring entrepreneurs found it quite interesting and took our franchise.” However, franchisees need to be cautious about the feasibility of the business concept in the market, before taking up the franchise.

Do not be a source of extensive experimentation: A new franchisor without any prior experience of franchising can experiment all his ideas on his initial franchisee. In that case, the franchisees need to be extra cautious and should ask the franchisor to justify his experiments.

Learner’s combination: Here as the franchisee and the franchisor are first-timers, so one should seek the help of franchise consultant and franchise attorney. As both are learners and any loss would directly influence the business as well as their partnership.

Financial assistance denied: As both are new, so it is more difficult to obtain business loans with a franchise company. Bank professionals and lenders may evaluate and deem the venture as too great a risk.

So the aspiring franchisees now you know the benefits of being the initial franchisee of a new franchise brand. So, why not fix a deal with an evolving franchisor and enjoy its leverages of being new and fresh.

Related: Upgrading franchise business with advanced technology

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