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Dec, 10 2012

WHAT IS THE RIGHT CHOICE- A NEW BIZ OR FRANCHISE?

Success for an investor hinges on the choice he makes out of two business approaches: to build a new brand or opt for leveraging existing brands which have already proved their worth in market. An investor must decide keeping in view the relative merits a

MANY investors have to face a difficult situation: whether to be an entrepreneur with their own brand of products/services or utilise the existing brands already developed by others. This decision making is very crucial and needs to be taken before entering any business. Each line of business approach has its own advantages and disadvantages. Let us discuss the dilemma that this issue poses.

Building a new brand

First and foremost, the quality required for this is a high risk taking capability of the owner/business partners in terms of ready spare time, money and experimentation on the own business concept in the market space. Many entrepreneurs have high failure rate during the initial years and most of them leave their business because of various factors, mainly due to lack of financial backup, leadership qualities, etc. However, it doesn't mean that entrepreneurs do not opt for developing their own brands. There are many success stories of owners because they know how to bounce back with the market dynamics and capture the market at the right time. Building a new brand requires more strategic thinking and innovation beyond money. Thus, intellectuals increase the success rate of business and this manpower buying capability is existent with the cash rich business owners in this age of knowledge economy. On an average, it takes eight to ten years to build a brand, which is also another risk to be taken after a successful business concept.

Leveraging existing brands as franchise partner

Everybody is not an innovator or product developer, but many are ready to invest in businesses as investors where some may get involved in the day to day activities of the business or allow others to operate it without being an active participant in its daily activities. These people have financial capability and are ready to follow the instructions of the brand owner. However, they lack the ability of strategic thinking but are ready to serve the customer. Most investors are interested in return on investment as early as possible and thus the concept of franchise partner can leverage the existing brands, which are already proven as successful business concepts. A franchise partner also saves time as the brand is already developed by the franchisor. The franchisor's advice and guidance gives direction to the franchise partner on what works and what does not in the business. Overall minimisation of business risks will be there. Also, some investors as franchise partners may be innovative in nature. Instead of applying their knowledge and skills merely to their respective franchise business, they should share them with the franchisor for the betterment of the overall business as a brand.

Thus, there are both positive and negative factors associated with the choice of an approach. An individual has to do self-evaluation in terms of his/her personal capability and individual business goals. Based on the pros and cons, they have to decide the path, whether to build a new brand by taking complete business risks or leverage the existing brands.

Srinivas Rao, Sr. Consultant (Strategy), Francorp, India.

Franchise partner also saves time as the brand is already developed by the franchisor. The franchisor's advice and guidance gives direction to the franchise partner on what works and what does not in the business. Overall minimisation of business risks will be there.

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