franchiseAs you think about opening your own restaurant the very first question you should ask yourself is “Do I have the experience and capital I need to start this venture?”  If the answer is yes, the next question is most likely “Do I open a franchise or start my own brand?”  While the idea of starting your own brand may seem appealing, it is important to consider one hard fact.  Over half of the businesses that start as new ideas fail in the first five years.  That’s not to say this country does not need and thrive on innovative ideas, but when it comes to your financial outlook you owe it to yourself to look at franchising with a proven brand.

The benefits to franchising can best be summarized with one statement.  There is less risk to the investor.  This isn’t to say that there are absolutely no risks involved in starting a franchise.  However, the chances of succeeding with a new business and generally the fastest way to see your bottom line in the black is to open a franchise rather than an independent business.

Considering that by and large, the majority of new businesses that do not survive that essential first five years in business are independent businesses, one has to question why franchises are a safer bet for your investment capitol.  There is no one magic answer, but rather several contributing factors that when pieced together complete a puzzle that is much more solid and therefore a safer investment all around.

Brand Recognition and Loyalty

Think about starting a brand new business from scratch. As an entrepreneur you have to figure out how to reach your target market, how to communicate to these potential customers what exactly it is that you offer, and entice them to spend their hard earned dollars at your establishment.

A franchise owner gets to skip the majority of those processes.  If the franchisor has been on the market for any real amount of time the general population is probably quite aware of what it offers and has a good impression of business.  It boils down to habit.  People are comfortable with what they know.  A perfect example in the restaurant industry would be opening a Wendy’s franchise.  If you are hungry and have a limited amount of time to eat, and you know that Wendy’s is fast food that you enjoy and can afford, you are more likely to eat at Wendy’s than to try the new burger joint that opened down the street.  While there are always some people that are more adventurous than others, the vast majority would save trying the new restaurant for when they have more time and money at their disposal.

Marketing
Brand recognition and brand loyalty come from another benefit of franchising- marketing.  Marketing is something that costs quite a bit of start up capitol for a new business, but for a franchisee is generally done on a much larger scale by the parent company.  Looking back to our Wendy’s example, the parent company obviously can afford much grander marketing plans than the average start up could ever dream of funding.  The money the parent company spends on advertising has a trickle down effect, benefiting both franchisor and franchisee considerably.

Planning

It is safe to assume that the reason why most independent start ups fail in the first five years is lack of a solid business plan.  With a franchise, these common mistakes have not only been made, but quite clearly overcome, for the parent company to grow to the point it is offering franchisees a part of the business.

While there may be extra costs involved in franchising, those costs are easily made up by the fact that the brand image and loyalty are firmly in place, large scale marketing is done by the parent company, and the majority of the business mistakes have been overcome before you hand over your first dollar.  In today’s economy, safe is the best bet you can make with your investment capitol.