What are some ways to start a business?
If you are an
aspiring entrepreneur looking for business opportunities. This blog is for you.
As the pandemic continues to pose a threat to businesses, venturing into an
entirely new business can involve considerable risk and can also result in
failure of the same. On the contrary, if you buy the franchise of a renowned
and successful franchise.
A franchise not only comes with brand goodwill but also provides a set of tried and tested successful strategic plans. The rate of failure involved in opening a franchise is almost negligible when compared to a startup.
Why should you choose a franchise business?
The franchise
business is growing at a sumptuous pace in India. The franchise industry has
witnessed a growth of around 30-35% over the last four-five years and the
overall turnover is estimated at around INR 938 billion. Currently, the sector
contributes more than 1.8% to the Indian GDP and is estimated to contribute
around 4% by 2022.
As the fastest-growing economy, the Indian market has tremendous potential for franchising business. With a high percentage of the young population, a franchise model will develop and progress well through shared ownership.
Till the end of 2017, the Indian franchise market was about INR 936 billion which has presented a considerable rise. In India, franchising as a growth and expansion route has exhibited commendable and prolific results across various sectors.
The franchising business in India was worth INR 848 billion in 2012. In 2017, it reached INR 3,570 billion, growing at a compound annual growth rate (CAGR) of 31% per year. The market is projected to reach INR 10,500 billion by the end of 2022, presenting a growth rate of 24% CAGR.
The reports suggest that the entrepreneurial spirit of Indians has led many individuals to enter the franchise business. Presently, around 35% of all franchise owners have been first-timers in business. These entrepreneurs choose franchising due to the following reasons:
● Wide range of benefits it offers such as
reduced risk
● Opportunity to associate themselves with an established brand, training, and support
Is it better to buy
a franchise or starting a new company?
When it comes to
starting a business, there are various assessment factors to determine the
right fit
● Franchise owners benefit from being part of a a larger, successful company that has already paved a strong and successful path
that will make it way easy to generate profits.
● Individuals who believe they can build a
better consumer web and want the freedom of entrepreneurship may be better off
starting their startup.
Before you choose to
venture into either of the two there are a few questions that you need to find
an answer to, if you want to make the right choice.
1.How do you handle risk?
If you are thinking
about starting a new business, you should be comfortable with taking up a high
degree of risk. However, you should consider the amount of risk you are willing
to take on. For entrepreneurs who are more risk-averse, or who are simply
looking to lessen their exposure to contingency, franchises are an appealing
option. It reduces the risk element of entrepreneurship to a considerable
extent, thanks to their established support system and proven business model.
Do you want to follow a pre-asserted format or do you want to give it a try?
The biggest advantage
of the franchising model is that all the fundamental, up-front work has been
done this includes the curation of a marketing plan, formulating
staff-related policies, designing logos, deciding on store layout, vetting
vendors, and ordering stock. With a proven business model in place and all
details established in advance, you will be in a position to start your
operations from day one.
If you are someone who would want to have your input on these aspects of a business and if you get excited about creating a marketing plan, picking your vendors, designing the organization of your store, and deciding on the details of your business — then starting your own company from scratch may be more appealing to you.
3. How do you handle taking command from other people or organizations?
Owning a franchise
gives you autonomy and independence — you are your boss. However, you will have
to run your franchise unit in compliance with the predetermined stipulations,
which may include sharing your franchise’s financial erudition or spending a
specific amount of money on advertising and marketing. All of this has to be
done in acquiescence of the franchise agreement
The best franchise companies also share a great deal of financial information with their franchisees in return. This allows them to benchmark their accomplishments with the rest of the franchise system. This can be a huge advantage for franchisees to help develop their financial performance and business profitability. Keep this in mind as you reflect on which business venture is right for you.
Pros and Cons of a Franchise
A franchise business
is the one that allows you to get into business FOR yourself but not BY
yourself.
Pros
Instead of having to reinvent the working wheel, a franchisee gets a lot of support from the franchisor, offering a better chance for success. A franchise owner often receives help from the franchisor in strategizing the working of the franchise unit.
● Site
selection for driving optimal
traffic with consideration for locations of competitive businesses
● Design
and construction of physical
facilities in the store to lure more customers.
● Financing to cover initial franchise fees plus start-up
costs that have to be incurred in setting up and processing the franchise unit.
● Training program to learn the business to follow the
proven operational methods
● Grand
opening programs to
jump-start the business and also as an advertising and publicity techniques.
● National
and regional advertising to
grow sales and publicize the franchise unit.
● Routine
business operations to
maintain best practices for optimal efficiency and to ensure the regular
working of the franchise unit.
● Access
to bulk purchasing agreements
from approved vendors to hold down the operating expenses.
● Ongoing
supervision and management support to answer any queries and doubts regarding the working procedure.
This structure helps
to considerably lower risk, compared with starting your own business from the
ground up. It is also instrumental in helping to overcome common obstacles that
are faced by many new entrepreneurs who have a lack of business experience and
access to capital.
Cons
For some
entrepreneurs, it may feel a little heavy-handed and result in a frustrating
lack of liberty. Some franchisors exert more control than others. If you are
looking for a business in which you can be creative, innovative, and apply your
personal touch or set your pricing, make sure the franchisor is willing to give
you the desired level of freedom.
● Franchise fee. This is the up-front fee that you are required to pay for the right to become a franchise owner of a specific brand. On average, the franchise fee across all industries was $35,185, but the fees can also be as low as $15,000 for some franchises.
● Start-up and operating expenses. This is the capital cost required to build and supply the physical business, including property, equipment, signage, inventory, promotion, insurance, payments, and more. Franchisees generally require financing to cover these expenses, which can run well into a six figures amount for most industries, and into the millions for others, such as the lodging industry. Some franchisors assist their franchisees with financing.
● Royalty payments. The franchise brand sustains a percentage of the gross sales from every franchise. This is the big ongoing income stream that motivates business owners to consider franchising their brand. Sometimes, there is a separate royalty fee just to help counteract advertising costs. A Royalty fee need not necessarily be a monetary fee, it can also be a part of the sales.Thus, a franchise can be the ideal option for an aspiring entrepreneur who would want to reduce the risk of their businesses at a higher investment cost.
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