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28th Feb 2010
Although it’s often said franchising is a less risky option than independent small business there is a lack of solid data to support this statement.
The difficulty in proving franchises are less risky than independent small business is it varies from franchise to franchise, and really depends on the sustainability of the individual business model.
Despite joining a franchise network with a well-known and established brand you still may not be protected from everyday business risks.
There have been a number of cases where franchise networks, despite their size or age, have ceased trading.
While franchising can’t guarantee protection from business risks, which are also present in independent business ownership, there are some benefits franchising brings to the table which independent business ownership doesn’t.
Often people who haven’t been involved in business ownership before enter franchising for the added support provided by the franchisor.
One way to minimise your exposure to risk is to carefully select which franchise network you enter.
Conducting thorough due diligence is essential and will help prevent any surprises arising after you’ve signed the franchise agreement, made the significant financial investment and are ‘locked-in’ to the particular franchise network.
By making an informed rather than emotional decision you’re likely to have greater success.
Given the lack of data on franchise versus independent business sustainability our Centre is conducting research into survival and resilience aspects of both business formats.
The research outcomes are expected next year and aim to provide further insight into this debate, as well as highlight methods used by both franchises and independent small businesses to increase their resilience, particularly in tough times.
I’ll keep you posted!
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