Are You Buying A Small Business Or A Franchise Business?

Are you buying a small business or a franchise business?

What’s the real difference?

To say Australia is a small-business economy is somewhat underselling the real impact small business has as an employer, exporter, importer and service provider.

In the last financial year, Australian Bureau of Statistics data shows there were well over 2.2 million actively trading businesses in Australia – an increase of 3.1% on the previous year.

With an estimated 95% of these businesses being classified as small businesses, there is little doubt there is tough competition for just about any new business to find the right customers in a crowded marketplace. This is before consideration of regulatory, legal, financial and logistical issues involved with running a business.

The risk of going it alone

Every small business owner takes on a big risk in ‘going it alone’ but the numbers indicate plenty are willing to take on the many challenges posed by small business ownership.

And the risks are considerable, particularly financial.

Small business ownership can be sold as glitz and glamour when in reality, you will be the first in and the last one to leave. Are you prepared to put in these hours? Are you willing to nourish your asset and evolve with it?

The benefits of the franchising model

Franchising is another method many small business owners have used in the hope of minimising some risk.

There is a lot to like about the franchising model. Buying into a franchise enables instant brand recognition, an established framework to draw upon, a head office team to support the franchisee with regulatory issues like industrial relations, and a community of like-minded people to lean on, and learn from.

These are all wins. They can certainly help a new business stand out from the crowd and hit the ground running, but it is vital that buying a franchise system is not seen by franchisees as a ‘mission accomplished.’

Simply purchasing a franchise does not give the franchisee the right to be a business owner. This must be earned. And like anything in life that is earned, it is hard work.

Buying into a franchise system is buying into a world of small business ownership and with that, any franchisee must embrace the entrepreneurial spirit and hustle to go on the journey with the franchisor.

How are you going to do the ‘little things’ right – how are you going to strip back the business and build it around you and the needs of your customers?

Franchisees must also embrace the leadership of owning a business – the impact their decision has on others and the opportunity to empower their employees and their local communities.

A new franchisee needs to invest in their employees and build up trust as an employer of excellence to attract and retain skilled and enthusiastic employees who can be trusted with the business.

The co-pilot, not the passenger

Unlike catching a bus where the driver does all the driving and navigation, and the passenger can tune out with a book, and find themselves at their destination, buying into a franchise system is like being a co-pilot of a plane. They are an active participant in the journey – helping to steer the business alongside the franchisor in order to achieve mutual success.

While the franchisor will provide a lot of groundwork, for example, some recognition in the market, tools, templates and head office support, the franchisee still needs to do all the same things any small business owner does in order to stand out.

Have you clearly identified your goals and objectives with your team prior to purchasing the franchise?

“Relying upon a head office marketing strategy was also not sufficient to maintain or increase sales, we had to focus on training and self-assessment to ensure that our customer service levels were adequate with the ever changing expectations of our customers.” Angus Christian, Helloworld Travel Franchisee

Simply having a well-known restaurant, professional service or consumer product will not automatically endear a new franchisee to the community. Investing in local marketing initiatives is vital to ensure a new franchisee’s venture is known in the area.

Customers must not only trust the franchise brand, but their local franchisee. This means ensuring consistency but also going the ‘extra mile’ and not just cruising on the brand value of the franchise system. 

While many new marketing initiatives may be driven by head office, a franchisee needs to be constantly driving their innovation through their own business to ensure they are providing good customer experience. 

Are you ready to take the next step?

Ultimately, what is the main reason you want to become a business owner? Is it the the prestige the desire for income, or is there a driving passion for entrepreneurship, innovation and leadership?

“Become involved in a business that you are passionate about. You are going to be at work for long periods of time when your business first starts. So, you may as well love what you are doing!” Paul Ferraro, Autobarn Franchisee

The desire for leadership and the need for life-long learning

With more than 2 million small businesses in Australia, sadly not all will succeed. While buying into a franchise system does mitigate some of the risk, it needs to be acknowledged that owning a business is a privilege.

It is a privilege to build something greater than one’s self – to build a team and empower people and a community.

Are you prepared to educate, motivate and empower everyone that you cross paths with?

As Simon Sinkek says, ‘leadership is an education and the best leaders think of themselves as the students, not the teachers’.

In holding this true, business owners can become business leaders as they learn and the ins and outs of their business, but importantly enjoying the journey, both the risks and the rewards.

“I understand buying a proven system in a franchise gives me a head-start to running a profitable business, however there is absolutely no expectation that the doors open and profit enters the front door without super hard work and effort” Ashlee Kelly, Listen To Your Body Franchisee