Franchise is indeed a viable alternative for own startup. However, franchise businesses usually carries with a bad rep. It may be due to some limitations or maybe its inflexibility.
Perhaps, it is the fact that business owners who choose to go the franchise route may not be able to design their very own unique brand.
Why Franchise? or Why not?
Franchise opportunities could be promising. But not just all potential franchisees can benefit from franchising, especially when you signed franchise agreements and committed a non-compete clause.
Having your own business is always appealing to us because it comes with limitless possibilities for success.
What is Franchise?
Franchise system is a system whereby an owner of a business (the franchise owner) with proven sales record, usually from previous franchise outlets, will sell or license their existing outlet to another party who wants to start a business of the same type (the franchise licensees or franchisee). They will also dictate what kind of products and services a franchisees will sell
Potential franchisee usually need to come up with a franchise investment, which includes a start-up fee, or franchise fees, some royalties to be paid and the franchisor licenses. Franchisee pays for the operations of the franchise stores as well.
All Franchise outlets, or franchise business, are owned by the franchise owner, but the products sold in each outlet are similar or identical, as well as the business concept; allowing the customers to experience the same standard of ease and convenience throughout all outlets of that particular franchise brand using a similar business method.
The license can also be defined as an agreement, a franchise agreement, between the franchise owner and prospective franchisees. Most profitable franchises will usually include harsh terms and conditions
Pros of Franchise
Broad customer base to tap on for sales.
Deal with proven business model, which usually has good track records. Franchise outlets are generally cleaner and more organised. They are known for their quality control.
Well known brand name.
Franchise brands usually have a good marketing team that will promote the brand, increasing sales and expand its reach to many people. They will also have more brand recognition.
Easier to start.
With a franchise agreement, the franchise owner doesn't have to worry about their brand name, marketing and product quality. They can focus on expanding the business.
Cons of Franchise
High investment franchise fee.
Franchise fee can range from a few thousand US dollars to hundreds of thousands of dollars. The price is usually much higher than what you can get if you set up your own business yourself. Franchise outlets tend to be more costly. The franchise fee and the royalty fees paid on a monthly basis, along with 3-5 years contract, make it difficult for some people to open a franchise outlet.
Investment is usually not returned during the first few years. Franchisees are required to sell additional franchise investment before seeing returns of their investment, which can be frustrating especially if the customer turnout rate is low at that point in time.
Control by franchisor.
The business model of franchise is usually designed to protect the franchisor, and its intellectual property as well as trade name, instead of the franchisees.
The franchising agreement will dictate how the business should run and what products and services to maintain the brand recognition. High initial fee and upfront fee makes it even harder to switch to other businesses.
A lot of people call franchise business is inflexible. Franchise owner has to follow the standards set by the franchisor, therefore change of product or strategy will not be allowed. They are always bounded by contract and cannot do anything they wish unless they want to close down their franchise business.
For any potential franchisee that need freedom to run their business, look elsewhere.
Difficulty to find the right franchise outlet.
If you are looking for a particular type of franchise business, or a brand that is famous in your country, you might have to travel long distances before finding the right outlet.
In many cases, there is no outlet nearby and you may have to drive or even fly across the countries to find one. Franchise outlets are often located in highly populated areas with high traffic, where it will be easier for them to conduct business.
For prospective franchisees out there
Before you become a franchise, you have to make sure that you are given franchise advisory service or proper training. Not all types of business works the same, even for the best franchises, therefore the knowledge that you get during your training should be applied to your outlet. If it isn't, then there is a higher chance of failure.
Before making your decision, it would be better if you talk to franchise advisors. There are a lot of franchise advisors out there, but not all can be trusted. Be sure to have your contracts reviewed by a lawyer to ascertain any hidden clauses or debts that you may have contractually obligated yourself to. There are also some franchise disclosure document that you may not be aware.
Many people will say that Franchise is better than opening a retail business by yourself.
Where can you find Top Franchise business
If you are looking for franchise opportunities around the world. You can check out the international franchise association website. It includes the most profitable retail franchises here. Please take note that not all franchise fees are cheap or affordable, but you should be able to find one that suit your needs.
Popular Franchises in Singapore
Old Chang Kee
Franchise business based in Singapore. This franchise is one of the biggest and most famous brand that is recognized all over Singapore, which is why it has such a high franchise fee.
They sell curry puffs and other local snacks like popiah and spring rolls. This business has been around since decades ago and they have opened many outlets throughout Singapore. They also have a few outlets in out of the country.
Need no introduction. This is the franchise of the convenience stores, where you can get everything from alcoholic drinks to chocolates and cigarettes here. They have a large number of outlets in Singapore. If you are looking for a business with high reputation, 7-11 outlets can be your choice.
Gong Cha Franchise
This is a famous tea franchise store. They sell different types of tea and most of their stores are located in malls and high traffic areas, where they can maximize the sales opportunities.
Their outlets are widely distributed throughout Singapore, with many customers flocking here for their teapots and popular bubble tea drinks like green milk tea and red velvet black tea.
This is another franchise store selling cakes and baked goods. Their outlet is usually located in high traffic areas, where customers can find them easily. They are mostly found in shopping malls like Paragon and Vivo City.
Pizza Hut Franchise
One of the pizza chain stores that provides delivery services within an hour's time frame, which makes them popular among night owls.
Crispy Crust Franchise
This is a famous pizza brand in Singapore and it has been around for years now. They specialize in thick crust pizzas and they use top quality ingredients to make their signature dough and sauce base. This franchise store is usually located inside shopping malls or high traffic areas.
Coco Ichibanya Franchise
This is a Japanese curry franchise store with outlets all over Singapore. If you like Japanese food, this can be an interesting brand to look out for as they use the freshest ingredients and cook it with rich spices. You will also find some creative style of cooking here that makes their dishes stand out from the rest.
Again this is a well known fast food franchise need no introduction. Their chicken products are sold all over the world and they have many outlets in Singapore, where you can try their famous fried chicken meal for lunch or dinner.
Best way to protect yourself as a potential franchisee
There are many franchise opportunities available in Singapore, but many of them are not genuine. That's why you always need to be careful before signing any contracts with any company that offer a franchise opportunity. Make sure you look out for the following things:
1. Ensure that the contract has no hidden fees or conditions that can risk your financial stability down the road. You may want to talk to other franchisees on that too.
2. Check if the franchiser have a clear vision and plans when it comes to growing the business in the long term. This is to ensure that you will be able to get assistance from them when you need guidance or assistance with your business expansion plan in the future since they already have a proven track record of helping their franchisees to grow their business.
3. Franchise fee is a big part of the contract and it should be paid by instalments or installments, not in one lump sum. This can help you gain more time to settle the payments.
4. Have a look at the franchiser's website, or from other franchisees, to see if they have been successful in expanding their business all over the world. If they can't expand their business, how can they help you to expand yours?
5. The franchiser must be able to communicate and answer your questions clearly. Find out what is their level of assistance when it comes to providing training, guidance and assistance for new franchisees before signing any contracts with them.
6. Before signing any contract, make sure you read it carefully and also ask for a legal professional to take a look at it if possible, so you can ensure that there are no loopholes in the agreement.
7. The franchiser must have good communication channels too, such as social media, email or telephone line where they should be able to answer. Any franchiser that doesn't have a proper communication channel is probably hiding something or trying to cheat you.
8. The franchiser must also provide you with the latest training, marketing strategies and customer management techniques so you can stay competitive in this hyper-competitive business environment. If they are not willing to do so then it shows that they are not committed to help you succeed.
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