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Startup
Guide
 Have
a big idea? Dreaming of ‘Kab Banega Crore pati’?
Driving down the road…and flash! You hit upon an idea that
could change the world. An idea that will put you into the annals
of history as a pioneer…but how and where do you start? I’ll
help you find out.
Business
ON your own, not OF your own – Franchise
What is
a franchise?
Are you are
one of those who wish to start a business venture on your own
but do not have the experience and confidence? Why not consider
franchising? You get to set up a business on your own but not
of your own. With a franchise you get the permission to run the
business, but using methods that have been already tried and tested
by another company, called the franchiser.
How to
set up a franchise?
You pay the
franchiser for a package. This allows you to sell his or her business
(products), to use the brand name and trademark, methods of operation,
technology or products for a fixed period (on a renewable contract
basis). All this comes for a price of course, called the franchise
fee (paid when start up) and an on-going royalty fee.
Once accepted
as franchisee, the franchiser provides you the licensed privilege
to do business. In return, you agree to run the business according
to the franchiser’s methods and standards.
Let us consider
both sides of the coin, for an unbiased perspective.
What are
the benefits?
•
Statistics consistently suggest that a franchise is more likely
to succeed than an independent business. Hence the risk is lesser.
•
You
get an established product or service along with national/regional
brand name recognition. Whereas an independent business is based
on both an untried idea and operation.
•
It
is often possible to obtain lower-cost goods and supplies through
the franchiser as a result of the `group purchasing power’
of all franchises.
•
Management
assistance from franchiser includes accounting procedures, merchandising
and personnel management and training.
•
Many
elements of the business plan such as standard operating procedures,
technical know-how etc, are already established by the franchiser.
Thus ensuring quality control and uniformity among the franchisees.
•
The
most difficult aspect of a new business is to set it up. Here
the experience of the franchiser is available through formal instruction
and on-the-job training. This helps reduce mistakes that are costly
in terms of money and time.
•
The
regional or national marketing is done by the franchiser.
•
A franchiser
will often assist in financing by making profitable and safe arrangements
with a lending institution to lend money to the franchisee.
What are
the drawbacks?
•
Payment
of initial franchise fee. It must be affordable by you and must
provide a reasonable return on investment.
•
Continuous
payment of royalty fees (a percentage of the gross income from
the business), as well as cooperative marketing payment.
•
Conformity
to standard operating procedures and pace of functioning, of the
franchiser.
•
Restrictions
on selling products or services other than those approved by the
franchiser.
•
Risk
of the franchiser turning out to be under financed and inexperienced.
•
No
way of extricating yourself from a relationship with the franchiser
other than by selling the business.
•
Failure
of the franchiser is likely to spell failure for the franchisee
as well.
There are
a plethora of franchise opportunities to choose from, depending
on your interests and priorities. As a franchisee, you must be
willing to limit your independence as an entrepreneur but considering
all the gains, the scales do tip in your favour. Franchise is
definitely an option to get started with, when you wish to start-up.
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