Becoming a franchisee: the pros and cons + roadmap

As an entrepreneur, you can start your own business or buy a business. But have you ever thought about becoming a franchisee?

A franchise formula can be interesting, but often entrepreneurs are not sufficiently aware of all the side effects.

What is a franchisee?

If you want to become a franchisee, you enter into an agreement with the franchisor. This is the owner of the chain, including the name and concept. You buy yourself in, so to speak, by paying so-called entrance fee, after which you may start a business and copy this concept. You are an independent entrepreneur, but adhere fully to the franchise formula.

Examples of franchise formulas

There are many well-known franchise chains, which also have great name recognition in our country. Think of:

• McDonald's
• Doppio
• Subway
• Hunkemöller
• New York Pizza
• Shoeby

Other businesses that operate mainly outside the Netherlands are:

• 7-Eleven
• Marriott International
• Taco Bell
• Pizza Hut
• Dunkin' Donuts
• Century21
• Snap-on Tools

Originally you found mainly catering concepts under this formula, but nowadays you can become a franchisee of all kinds of concepts. Think of employment agencies, child care centers, home furnishing stores and gyms.

Different franchise formulas

If you are thinking about becoming a franchisee, you have two choices, namely:

• Soft franchise
• Hard franchising

Soft franchise

Soft franchising means more freedom for you as an entrepreneur. You have more freedom in setting your sales and purchase prices, allowing you to optimize your revenue. You can also operate your business more according to your insights, which can create great differences between branches.

The disadvantage of this form of franchise is that it is more expensive to advertise, for example, because you cannot take advantage of standard advertising. In addition, you are bound to have more start-up costs and run more risk.

Hard franchising

Hard franchising is stricter, giving you little control over inventory, purchase and sale prices, advertising and corporate identity. However, you do benefit from attractive discounts and greater security because you can share media costs with other outlets. Many things are fixed, so you spend little time on innovation and creativity, because everything is fixed in the concept. The franchisor also supports you, not only in the broad outlines of the concept, but also in its support.

A major disadvantage is the limited freedom. For a little entrepreneur, the security outweighs the lack of entrepreneurial freedom. You usually have no say in suppliers and other agreements, because everything is determined from above.

Pros and cons of becoming a franchisee

Are you still hesitating about becoming a franchisee? Then weigh all the advantages and disadvantages, but also make an important choice beforehand. Do you want to implement your own ideas and maximize entrepreneurship? Or are you fine with working within certain frameworks and going for more security?

Advantages

• Benefit from name recognition and previous successes;
• Support on many fronts, such as marketing and strategy;
• Buying advantages;
• Legally and economically independent;
• Internal training opportunities;
• Support in finances and use of internal accounting system.

Disadvantages

• Remittance of entrance fees and periodic costs;
• Mandatory franchisor protocols;
• Losses are for your own account, but profits you share with the franchisor;
• Few choices;
• Mandatory purchase of products and services;
• Concurrency.

Roadmap to becoming a franchisee

For every entrepreneur, this process looks different, but in general, these are the steps you need to go through to become a franchisee:

1. Request information and sign up;
2. Introduction and suitability test;
3. Follow-up interviews with far-reaching information on finances and franchise contract;
4. Pre-contractual information document;
5. Prepare for an efficient start, such as finding suitable location;
6. Signing franchise agreement;
7. Get started!