Franchising is definitely the safest way to start a business. The franchiser (franchise company) has already gone through the trials and tribulations of perfecting a business system for others to follow. Starting out with initial training, franchisees may spend up to two or three weeks in a classroom and then a similar period at an actual franchise location. They’re taught everything from soup to nuts, so to speak.
From there, franchisers provide location assistance and may even provide a set of blueprints for interior build out or construction. As grand opening nears, franchisers may provide assistance with recruiting personnel and provide marketing guidelines that have been used at grand openings at other franchise locations. Ongoing, franchisers make available marketing materials, provide operations support and financial analysis. All this, while protecting the integrity of the trademark and the brand itself.
Financing is still available to the franchise industry, except the guidelines and requirements are stricter than in years past. Think sub prime mortgage and the you’ll see virtually the same pattern. Unfortunately, many franchisees were approved financing with less than stellar qualifications and without appropriate assets as collateral. The result was similar to that in the housing market.
Fortunately, many lending and investors sources still view franchising as safe. The caveat is the concept itself must still be in high demand and where consumers will spend their money. Obviously, a franchise that sells high end items may not be a safe investment as many consumers have slowed down or eliminated spending on such items. Therefore, the chance of succeeding in this environment is certainly diminished.
On the flip side, many people still desire value and a social experience, which is why restaurants continue to grow as evidenced by the recent IFA report on franchising. The report projected the restaurant sector will experience positive growth in 2009. In addition, as more people seek out healthy alternatives, a new wave of unique food concepts have emerged. Providing freshly prepared food ranging from Mediterranean cuisine to organic pizza and burgers to flatbread to tempting salads, today’s food franchises have become targets for both sophisticated entrepreneurs and transitioning corporate executives alike.
These concepts are relatively low-cost to start as they don’t require the equipment of their fast food counterparts as there is no need for large industrial fryers, grills, etc. As the food is all fresh and healthy, the equipment requirements are relatively low. In addition, the space requirements are minimal. Instead of 4,000-6,000 square foot buildings and up, today’s emerging concepts work in 1,200-2,000 square leased space.
Welcome to the next wave in franchising.