Reason 1: reduce the risk associated with entrepreneurship
The franchisee who joins a network buys the recipe for proven entrepreneurial success. “In the universe of the franchise, you do not have to invent a concept but to decline it which is simpler”, recalls Laurent Kruch, president of Karedas Consulting specialized in the franchise.
Simpler and therefore less risky: all sectors combined, the survival rate after five years in a franchise business is 80% but drops to 50% for independent businesses. The franchise candidate can further reduce this risk before signing by studying the history of the brand he plans to join, by questioning the members of the network already in place, by finding out about its evolution in the articles of press.
Reason 2: get a loan more easily
As a result of this lower risk, banks lend more easily to customers who undertake under a franchise than to independents. What’s more, they often do this without requiring a mortgage on the candidate franchisee’s own property and at a better rate. However, the bank loan constitutes an almost obligatory passage. “In more than 95% of cases, the franchisee must borrow 70% of the amount requested by the franchisor”, recalls Rose-Marie Less, director of development and animation at the French Franchise Federation. And even if he has enough money to get started without borrowing, the candidate has every interest in submitting his project to a bank, which will assess its viability.
Reason n°3: take advantage of the reputation and know-how of the franchisor
The candidate for the creation or takeover of a franchised store benefits from the first day of activity from the image and reputation of the franchisor resulting from investments in advertising and the presence of the latter in the territory. He will not have to make as much effort to make himself known and inspire confidence in his catchment area since customers will come on their own, attracted by the notoriety of the brand.
The franchisee also benefits from the franchisor’s know-how, the fundamentals of which are instilled in him during the training and internships he carries out before flying on his own. This configuration allows novices to embark on sectors and trades of which they know nothing and to succeed in their professional retraining.
Reason n°4: to be independent but not isolated
The taste for independence and autonomy is one of the main motivations of entrepreneurs. But independence can lead to isolation, which leads to bad decisions. However, a business creator must decide on everything in a wide variety of areas of expertise (management, commerce, sales, marketing, communication, finance, etc.), which increases the risk of making mistakes. Joining a network of franchisees makes it possible to avoid this isolation. “The franchisor will be able to advise you to avoid management errors. You can also solicit other franchisees who are colleagues and not competitors since they operate in other catchment areas” recalls Laurent Delafontaine, founding partner of Ax Réseaux, franchise consulting firm.
Reason n°5: build up a heritage
The franchisee owns his business which increases in value as he builds up a clientele. He can therefore resell this fund after having made it bear fruit to turn to another activity. Another common pattern: the franchisee who started to manage his end of career resells his business when he retires. In the latter case, he has built up assets that will allow him to leave working life in good conditions. “In general, the turnover of franchised companies is generally higher than that of isolated independents because they benefit from the notoriety and innovations of the sign to which they are attached. Their goodwill is thus much better valued” , points Rose-Marie Less.