Let’s be honest, franchising has never been seen as a dynamic way to run a business. When the term was first introduced, all the way back in the 1500s, it meant ‘freedom’ and represented a social status above lowly serfdom. Today, ironically it’s often seen as a way of running your own business without the freedom of someone who goes it alone.
This blog takes a good look at where franchising got its bad reputation and goes on to explain why these negative views are seriously outdated.
To understand when and why the negativity started, it’s worth taking a brief look at the key landmarks in the history of franchising since the practice was first introduced back in the Middle Ages.
A brief history of Franchising
There are three common business challenges that the franchising model perfectly addresses: rapid expansion, limited financial and human resources and doing business across vast physical distances.
That’s what led the King of England to grant the London Company a charter for Virginia in 1607. As a result, settlers were shipped to Jamestown in Virginia for the first permanent British settlement in what was to become the United States.
The first modern-day franchisor is believed to be a Canadian-American, Martha
Matilda Harper started to franchise her hair salon business in 1891. Her model included training, branded products, adverting and group insurance, all of which are still associated with the franchising model today. At its height, Martha Matilda’s business empire extended to more than 500 salons.
Franchising really started to take off in the 1950s with a sudden rise in the number of branded goods and services chains. Arguably, the most famous of these was McDonald’s. In 1965, with over a thousand locations, the hamburger chain went public on the stock exchange. Shares opened for trade at $22.50 and, within a month, the price had more than doubled to $50 a share.
McDonald’s, and others like them, were proving how successful franchising could be. However, this era of rapid growth did not come without challenges. Others, whose intentions were less than honourable, tried to jump on the bandwagon.
During this era, franchising was an unregulated industry. Not surprisingly perhaps, a few unscrupulous individuals saw it as an easy way to earn a quick buck by selling franchises that were never able to deliver what was promised.
As a result of the need to protect vulnerable people from being parted from their hard-earned savings, the International Franchise Association (IFA) was founded in 1960. That’s when things started to change for the better and now the IFA represents more than 1,300 franchisors and 10,000 franchisees.
The world of franchising today
Times have changed, franchising is now heavily regulated, and more and more people are opening their eyes to the many benefits of franchising as a way to run their own business.
A good indicator of the way opinions have shifted is the fact that private equity firms are currently taking a big interest in supporting the growth of franchise organisations. That says everything you need to know.
As franchising has become more mainstream, it is now attracting brighter and more ambitious individuals seeking the considerable rewards on offer. The safety net that comes from being part of a proven business is just an added benefit for these entrepreneurs.
Addressing some of the common modern misconceptions
Despite the fact that more is known about franchising today, and an ever-increasing number of people are eagerly embracing the business model, there are still some misconceptions that need addressing.
Firstly, it’s often said that as a franchise holder, you’re not really your own boss. While there may be the odd occasion when you wish you weren’t in charge, the fact is the buck does stop with you. You’ll be asked to follow certain aspects of an established and proven blueprint like all franchise holders do to ensure you’re delivering a consistent customer experience. But that just makes sound business sense. Beyond that, you’re plotting your own course.
We’ve also heard people say buying a franchise can be a bit expensive. Yes, certain franchises can be pricey to buy into (usually for good reason) but others can cost as little as a few thousand pounds. According to the British Franchise Association (BFA), the average cost of starting a franchise business is £42,000, a small investment compared to starting a business from scratch.
A final misconception to address is that well-known franchises are the best bet. They can be, but that’s not always the case. Up-and-coming franchises may have a more agile approach and more willingness to listen to brave new ideas as the franchisor is unlikely to be set in their ways. Finding a product or service with a unique selling point is more important than just looking for an established name to join.
Overall, franchising is now a great choice for entrepreneurs
According to a recent British Franchise Association (BFA) and NatWest Franchise Survey, around 90 percent of franchisees reported trading profitably after just two years. You can compare that with approximately 50 percent of all independent businesses that will go bust within the same time period. As a franchisee, the odds of success are definitely in your favour.
Without a doubt, that’s one of the main reasons it’s usually easier to secure finance for purchasing a franchise than a non-franchised business.
It’s also reassuring to know most good franchises come with a ready-made support network that’s always there when you need it. That certainly beats the feeling of loneliness and isolation that can come from setting up your own business from scratch, particularly when you encounter the odd bump in the road ahead. That’s when you might hear a very different ‘F’ word from those who decided to go it alone!
If you’d like to find out more about Swimtime, the UK’s largest independent swim school, and a successful franchise model, please just follow this link. We’d love to hear from you and answer any questions you might have.
