Purchasing a Business Model that Works.that
This piece is for investors and potential investors that do not want to go through the hassles that come with building a new business from the scratch of scratch.
By going for this option, you get to buy the business model, experience, recognition, goodwill, and training, etc. of an already existing business.
If you have eaten at Mr. Biggs, Chicken Republic, McDonalds, Dominoes, etc. chances are that you ate out at a franchise of the original company.
Good thing with going for this option is that it mitigates the risks that come with the trial and error stage of a new business.
If you are backed by a good company, you probably have a very good chance of scaling from the get go. A good franchiser will help you stay grounded on how to run the business so that you have better chances at scaling.
This will save you from going under while you work your way up the learning curve.
We have three elements involved in a franchise:
A franchiser (The owner of the original business)
The franchise (The permit for running a person’s brand.)
A franchisee (The one who seeks to purchase the franchise)
It is important that you conduct your due diligence investigation on the franchiser from the get go. You want to make sure the company has developed a working business model and that it has a successful track record. Also, find out whether the company has helped others successfully establish similar franchises .
Depending on what you want to establish, you may opt for any of the following styles of creating a franchise:
Buying this type of franchise means that you act as a distributor, but using the name of the manufacturer. This is the common way that automobile dealerships operate outside of the original company.
The franchisee is given a permit, in some type of exclusive market arrangement, to sell the manufacturer’s products in a specific geographical location or market segment.
This is very common with fast-food outlets like Dominoes, Mr. Biggs etc. The franchiser gives the franchisee standards on how to prepare food. The franchisee is required to prepare food according to the quality standards set by the franchiser. The franchiser goes on to train the franchisee on the required standards.
Here, the franchiser gives the franchisee specific specifications on how to manufacture a product. He then gives him a license to do so.
This is the style that the Coca-Cola Company adopted.
So over to you. Perhaps, what you want is to start a business with strong expertise behind you. You will rather a greater likelihood of success. A very smart alternative is to opt for a franchise. Many manufacturers may even assist you with initial funding.
Don’t forget, when you eventually buy a franchise, you will have to decide what structure of business you want to set up: a partnership, sole proprietorship, or a company? If you decide to opt for a company or whatever style, you will still need to go through the required processes e.g. registration and incorporation, where necessary.