Why is the Failure Rate Lower for Franchisees Than it is for Independent Businesses and What Advantages Does That Convey to the Nascent Entrepreneur?

Why is the Failure Rate Lower for Franchisees Than it is for Independent Businesses and What Advantages Does That Convey to the Nascent Entrepreneur?

Franchisor support services vary widely from franchise to franchise.  Some things such as the method of doing business, use of the established brand name, and training programs are common amongst all of them.  These by themselves can be extremely useful to the budding entrepreneur.  For someone who may have never owned a business the exact procedures and methods of running one are probably elusive.  Owning a franchise provides a proven and successful way of learning.  Franchise support services generally require full training before purchase and as an ongoing exercise throughout ownership.  This can be the single biggest hurdle for any business owner let alone the greenhorn.  Use of the brand name is also valuable not only in and of itself.  For the grooming entrepreneur seeing how a nationally recognized company targets its market and cares for its brand can have enlightening results in the event that the franchisee/entrepreneur ever decides to create a brand of their own one day.  Additionally franchisors may or may not offer additional value-added services.  The list includes but is not limited to; financing, networking, sales assistance such as sales leads or training, ongoing education or additional educational services, on-sight support and/or support via other communication mediums, and last but not least experience.  Obviously the more support a franchisee can get from a franchisor the better.  This is one crucial area the entrepreneur should do research on prior to committing to any franchise. In regards to some of the additional services franchisors offer let’s take a look at the financing options.  Some franchisors offer financing in two different ways; direct financing which is rare but does happen occasionally and third-party financing.  Direct financing allows for the franchisor to not have to come up with any cash up front.  The franchisee and the franchisor come up with an agreement on how the franchisee will pay the franchise fees over a period of time.  Third-party financing is more common and the franchisor usually has lenders that they work with and point the franchisee to them.  The Small Business Administration is one of the lenders that are pointed to for they usually offer better financing terms and additional support.   How important is it for the aspiring entrepreneur to have in-house financing as an option or be led to a lender who has a strong relationship with a particular franchise?  Pretty important I would say. Some additional benefits might...

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