Should You Invest in a Franchise in a Competitive Market?

One of the biggest reservations anyone has when considering to launch a business is how fierce will the competition be? If you’ve been doing due diligence as part of researching franchise opportunities, you’ll likely come across how well the demand is already met. The biggest concerns people have are:

• How do I make my business stand out from the competition?
• How will I win clients/customers over who already use the competition?
• Will demand continue to be strong enough despite the competition?

Starting up a business from scratch exposes you to greater risk compared to investing in a franchise. You need to find your own suppliers, carry out your own marketing (in its entirety), find customers and carry out the work. But with franchising, you get most of this. Partners and suppliers are usually part of the agreement, a head office team will often carry out some form of national marketing, and they may help you find customers too. Some franchises even guarantee a minimum number of bookings in your first year! Franchising is a method of business expansion where a brand owner makes their trademark and IP available to a third party – you. Beneficial for the brand owner (franchisor) because their brand becomes better known and they get increased capital, royalty fees etc to better market the brand. Beneficial for you – you get an established business, recognised brand and a business in a box – all for a similar, if not lower, price than you’d end up spending if you were to try setting up the business yourself.

Three Things to Consider When Investing in a Franchise in a Competitive Market

If you’re looking to get into business ownership, seeing businesses in your area already filling the market gap can be disheartening. It might make you feel that any additional businesses are obsolete. But despite the competition, franchise businesses are always looking to expand. There are at least 5 different oven cleaning franchises in the UK, and the franchisors know that. But despite this, they’re eager to fill as many territories across the UK covering largest possible area. Why? Because they know that despite competition, having a powerful brand and franchise network is what makes franchising successful in business growth.

Here are three things to keep in mind when investing in a franchise, in a market that could be considered already filled.

1. Competition Isn’t Necessarily a Bad Thing

If your exploration into a business setting shows competition – ie other brands or businesses already serving the same market – this can be offputting. Your first thought will likely be how you may struggle to overcome this competition. But the first thing to remember is that if there is competition, it means there is demand. If those independent businesses are operating sustainably, it means that what they’re doing works and the service they provide is in good demand. Maybe it’s gardening or oven cleaning, maybe it’s childcare or soft play. Whatever the business is, if there is competition, it shows there is demand.

Competition can also be used to improve your own business, motivation and tactics. You can benchmark with your competitors, find out what they do, carry out competitor analysis and take the things that work, leveraging them in your own business to empower you to grow.

2. You’ll Benefit From Increased Buying Power

Franchise networks benefit from increased buying power. When all franchisees use the same supplier, this is good for the supplier. The supplier is able to build a strong relationship with the franchisor and franchisees. Having this relationship means continued custom for the supplier. In exchange, the supplier is in a position to offer a better price for their products and services. Also referred to as collective buying power, when the franchisees are able to buy products and services at a much cheaper rate, they can reflect this affordability onto their customers.

One good example of this is fast food. Big name fast food and drink franchises can sell their products really cheap to customers, and the same can be said for smaller franchise brands. Obviously the more franchisees a franchise network has, the more visible the results of this.

Your independent business competition won’t be able to benefit from increased buying power. At least not as much as a franchise network would. And if you were to start a business up for yourself, one of the biggest challenges you’d face would be finding a supplier that can provide you for a good rate.

One of the biggest benefits of investing in a franchise is that you get access to these suppliers. Some franchisees even require you to use the same suppliers, because it enforces the same level of quality between franchisees, plus the relationships. This isn’t just limited to physical products. It includes services like website management, SEO, marketing, vehicle leasing agreements, franchise finance and so much more. Franchises build relationships with these suppliers, resulting in group buying power, and thereby able to offer services that can effectively overcome competition pretty quickly.

In a similar manner to group buying power, you also have powerful group marketing within franchise networks. Much more powerful marketing tactics apply to franchises that local independent businesses simply wouldn’t be able to afford nor benefit much from. This includes newspaper print and magazine advertising, plus TV advertising. All of which are very expensive. TV and print advertising can easily cost upwards of £5,000 for a decent length campaign with generous reach. A small independent business simply wouldn’t be able to afford, nor benefit, given they only target a small area. Whereas with TV advertising the whole network benefits, generating sales for franchisees.

3. You’ll Have an Established, Recognised Brand Name

And finally, you’ll be trading under an established brand name. The more franchisees a network has, the better known this brand and trademark becomes. As this grows, so does its reputation and awareness. When a franchisee establishes themself within their own territory, brand recognition is almost immediate. Customers already know who you are, before you’ve even started trading! If a McDonalds were to set up a new franchisee in your area, people would already associate the brand with fast food. If Wiltshire Farm Foods established a new territory near you, you’d immediately know they offer frozen meals delivering sunshine to your door. One of the biggest benefits of franchising is using an established brand name.

Regardless of how many franchisees a network has, whether its 1,000 or 0, you’ll know that the franchise offers an established brand, and a business model that is sound, turnkey and enables you to get up and running quickly with minimal fuss. The franchisee helps you with getting started, providing training, support and marketing. If you’re new to business, or if you already own a business and wish to rebrand – harnessing a franchised business’s trademarks, franchising is a fantastic way forward.

No time wasted reinventing the wheel, if you’re looking to get into business for yourself but not by yourself, why not explore franchising?

Should You Invest in a Franchise?

Franchising is a great entry point to business ownership. Many franchised businesses are ideal for new entrepreneurs, because many have low costs and low overheads. Van based franchises for example. Generally the franchise fee is no more than £15K, and the franchisor will likely work with vehicle leasing companies to offer you the best possible deal should you choose not to buy the vehicle in one sum. Many home based franchises also demonstrate low overheads with low startup costs. Being your own boss means you can work as many hours as you wish, unlocking unlimited earning potential. The biggest takeaway from franchising is the business in a box coupled with a proven business model and established brand. No time is spent building up a new brand name and trademark, it’s all there waiting for you.

Looking to run your own business? Why not consider franchising? Discover a world of franchises at Franchise Planet.