7 Reasons To Franchise – #7 Franchising and the Risk Equation – What is the right amount of risk?

Matt Uncategorized

Offering both the flexibility and independence of being a small business owner, plus the support and infrastructure of a larger corporation, a franchise can be the ideal opportunity for anyone interested in becoming an entrepreneur. However, while many articles will breeze through some of the positives and negatives of owning a franchise, few take the time to actually detail out thoughts and research behind the points they raise. 

The goal of this is to help you see the positives of opening a small business through a franchisor. We’ll share some stories, statistics, and antidotes detailing why we think franchising is the right path for many inspiring entrepreneurs. 

Here we go…the final of seven reasons why franchising may be the right path for you to open your business.

Franchising and the Risk Equation – What is the right amount of risk?

Most likely you know the story of Mark Zuckerberg and his path to building one of the most successful companies in the world, Facebook.  While others before him had similar ideas, no one was able to execute and market the social platform quite like him.  As a result, he’s a billionaire many times over.  In 2011, Mr. Zuckerberg and Facebook were ready to launch a new platform that would offer deals to its billions of users.  Off of the success at the time of Groupon and Living Social, Facebook was ready to quickly be the largest player in the marketplace given it already had access to billions of users.  Facebook Deals was launched with much fanfare in April 2011.  Along with Facebook Deals, the company was dipping its toe into its own virtual currency.  While the currency was a few years old, Facebook Deals was the vehicle that it would take off with. 

Marshall Kirkpatrick of Tech Crunch described how Facebook’s massive user base, demographic information and location check-in could make “roadkill” out of Groupon and LivingSocial. “Groupon and Living Social offer nothing but deals,” Kirkpatrick wrote. “Facebook puts deals in between pictures of your sister’s baby. Which do you think you’ll click through more often, all other things being equal?”

Facebook Deals was shut down 4 months after launch.

While visionaries like Zuckerberg often reap the rewards of what they create, they also bear the risks.  For every Zuckerberg, there are literally hundreds (or thousands) of others that have failed in their attempt to bring something “groundbreaking” to the marketplace.  At the end of the day as a potential business owner, you are already willing to accept some risk.  Your risk tolerance is already much higher than that of the average person. 

The question then becomes “How much risk are you willing to accept?”. 

Real quick, let’s talk at a core level about what a franchise really is.  A franchise, in theory, is a business that has been successful that is trying to duplicate its business by selling the concept to another person.  In order for a business to be a successful franchise candidate, there should be a record of success.  There are exceptions….for instance, I always wonder about the franchisor that is trying to franchise a concept they have never tried themselves. 

While starting a business is a risky venture no matter the path you choose, by starting a business that has already succeeded elsewhere should give you the comfort that the concept has already been proven.  The branded has been vetted.  The marketing has worked.  While much of the success of the business will be determined on your execution of the plan, you know that the plan has worked elsewhere. 

In football, most teams have the “bread and butter” play.  When they are driving for the game-winning touchdown, they often call some variation of this play because it has worked before.  In essence, with a franchise, you are getting a model that has already worked.  Just like the football play, there is no guarantee that the model will work again, however, there is a track record of success.  This track record of success limits your risk.

What it Comes Down To

The decision is a very personal one.  No matter which you route you decide, the business will ultimately be yours.  Hopefully, this has given you a little more insight into the decision then you had before.

Below are links to each article in the entire series of 7 Reasons to Franchise.

If you are interested in discussing franchising or oppurtunities with Monkey Bizness, please reach out to us