Have you ever wondered how large corporations like Tealive and Burger King manage to have stores all over Malaysia? They seemed to be all over the place. Brands like this may quickly grow their brand and market share through a business concept called franchising.
Local entrepreneurs are authorized to carry the brand and sell items and services associated with a certain brand under specified restrictions in a franchise agreement, without actually owning the brand. This provides a number of advantages for both parties.
Franchises enable global corporations to spread their company and brand throughout the world with minimum investment and little concern for local corporate structures. Furthermore, it provides local enterprises with the recognition of a worldwide brand as well as simple access to advantages and services that are generally only available to huge corporations.
What Is Franchising?
Branding is a top priority for franchising. Small business start-ups usually face severe competition from larger corporations. These brands have been around for a longer period of time, and consumers are familiar with the products and services offered by these businesses. As a young company, it may be challenging to fight with them. Franchising is one method that might help new companies bridge the gap.
A franchise agreement is simply an arrangement between two companies that permits one party to use another party's brand, product, or manufacturing method. Franchising often occurs when a firm has a solid business strategy that would benefit from considerable expansion but lacks the money to fund this development. Instead, the corporation licenses its brand, product, or service to local businesses in exchange for fees and royalties.
It is a quick and straightforward way for the brand-owning corporation to export brands, while local companies receive equipment, assistance, stock, guidance, and, of course, a high-profile brand to go with their product. Although franchising is primarily a marketing solution, it may also be a capital-saving option because franchising your brand is nearly always less expensive than physically growing it across the country through owned retail shops. It is not only less expensive but also quicker. This is significant if you feel your brand has a limited appeal and requires a critical mass to be sustainable.
The Benefits of Running a Franchise In Malaysia
When it comes to beginning a business, many people chose an international brand because they believe success is assured. However, this is not always the case. To ensure you are making the right decision, it is important to understand the benefits and disadvantages of having a franchise.
Low Failure Risk
In general, franchises have a lower failure risk than sole ownership. When a franchisee invests in an international brand, they are joining a strong brand as well as a network that will provide them with assistance and advice, making it less likely that they would fail.
Furthermore, franchisees have previously validated their company idea, giving you confidence that the items or services you'll be providing are in high demand.
Business support
Depending on the franchise agreement and the business structure, the franchisee may obtain practically a complete business operation. An international brand would provide the brand, the equipment, the supplies, and the advertising approach to franchisees. As a consequence, a comprehensive business operations framework would be prepared for new franchisees.
High Brand Awareness
One of the fantastic perks that come from international brands is brand awareness. Franchises, on the other hand, are well-known enterprises with built-in consumer bases. When you start a franchise with this distinctive branding, people will instantly know what your business is, what you provide, and what they can anticipate.
Profits
In general, franchisees make more money than individually owned enterprises. Most franchises have well-known brands that attract a large number of customers. This popularity leads to more earnings. Even franchisees with a large initial investment for the franchise fee find a significant return on investment.
Disadvantages of Starting a Franchise
While there are several benefits of franchising, it would be ignorant to believe that there aren't also disadvantages. Let us go through this further.
Rules and guidelines
While an international brand allows the franchisee to be their own boss, they do not have complete authority over their business and are unable to make decisions without contacting the franchisor. The most frustrating disadvantage that most franchisees have is that they must follow the restrictions mentioned in the franchise agreement. The franchisor has some control over the majority of the business and the franchisee's actions.
Ongoing expenses
While the franchise fee provides many benefits to the franchisee, it may also be expensive—especially if you join a well-known and successful business. While this frequently results in higher earnings, coming up with this initial capital can be difficult for any small business owner.
In addition to the initial expenditure required to launch a franchise, there are recurring costs that are specific to franchises. The continuing expenses of the international brand should be specified in the franchise agreement. These expenses might include royalties, advertising, and a fee for training services.
Lack of financial privacy
Another disadvantage of franchising is the loss of privacy. The franchise agreement will almost certainly state that the franchisor has complete control over the franchise's financial ecosystem. This lack of financial privacy could be viewed as a disadvantage by franchisees; however, it may be less of a concern if you value financial counselling.
Understanding How To Choose A Good Franchise
Starting a business through franchises in Malaysia is growing increasingly popular. It can be an excellent method to reduce the risks that are often connected with new businesses. The Malaysian government has set an ambitious goal for the franchise in Malaysia to contribute 9.4 percent of GDP by 2020. It aspires to establish Malaysia as a premier franchise centre in the region.
Choosing which franchise to join is an essential choice. It is vital to thoroughly understand everything there is to know about the international partner you choose to join. We've put up a helpful list of the greatest things you can do to help you launch your own brand.
Make A Research
You've chosen to open a franchise, which is fantastic! The first step is to determine whether there is a market for your desired product or service. When running a real business, you need to survey your business location and competitors in the same industry. Furthermore, franchises do not normally come with an exclusive region. That is, in addition to competing with other businesses, you may also face competition from other franchisees of the same brand.
It is usually suggested to perform market research and a survey. Is it true that people want another outlet like this? Are they aware of the brand? What is the level of competition? All of these are critical inquiries that may give you essential information about the region and client base being provided. Do not underestimate the market survey, the survey results are critical for you to make a decision and create your business plan.
Join Franchise Events
After you've determined that there is sufficient demand, you might want to learn more about what you're getting into. After you've determined that there is sufficient demand, you might want to learn more about what you're getting into. Attending franchise events might allow you to learn more about your options. These events are often hosted by franchisors seeking franchisees, franchise mediation firms, or franchise regulatory agencies.
During these events, you may network with representatives from these three parties and discover about available possibilities for the area you have in mind. However, be cautious since the franchise booths are usually handled by salespeople who will attempt to convince you that their brand is the better option.
Visit The Franchise Store
Now that you have a good understanding of all of these businesses, it's time to go out and see for yourself. Learn about the locations you visit. You may have visited a McDonald's 100 times in your life, but you will view it totally differently if you go there to explore a possible business.
The idea is to obtain a sense of how things work on a daily basis. How is the workforce managed? What is the typical wait time? Is it busy at peak hours? What if that incredibly simple-to-run restaurant franchise with assured revenues turns out to be a dump that is half-empty during the day? The simplest way to find out is to go prove it yourself.
Talk To Former Franchisees
Speaking with a former franchisee of your desired franchise may be quite beneficial. They have a wealth of knowledge that you may draw on when it comes to running this specific franchise firm. What are the dangers? Is there anything wrong with the business model? Most importantly, if they have already quit, inquire as to why they left. Knowing the reason and conducting an analysis allows you to fix the problem. Ex-franchisee experience is a valuable asset to include in your future company plan.
Seek advice from the Malaysian Franchise Association (MFA)
As a Malaysian, you can seek advice from the Malaysian Franchise Association (MFA) before making a decision. The Malaysian government recognized high franchise rates as a major economic engine in the early 1990s. The purpose of the Malaysian government establishing the MFA is to assist in the development of a franchise-friendly economic environment.
MFA will organize events, provide support to franchisees, and provide training courses to help franchise owners succeed in their enterprises. They may be a valuable resource and help when it comes to getting your business off the ground.
Consult With Consultants Or Attorneys
Consultation with an independent franchise consultant is a wise option for learning more about the franchisee's journey. Typically, they are lawyers that specialize in franchise agreements. These lawyers can give valuable insights that your usual lawyer may overlook.
Alternatively, the franchisor may employ an in-house franchise consultant that assists prospective franchisees with the legal aspects of starting their firm. You normally do not pay a charge since the consultant receives a commission from the franchisor if you sign up.
Design Your Business Plan
You should ideally know which franchise you want to join by now. It is now time to create your business plan. Your business plan will serve as your company's blueprint. A great business plan helps persuade prospective investors to provide you with funds if you want external finance. Aside from that, it might serve as a guideline for your first few years in business.
Writing a successful business plan is incredibly difficult since you will have to make estimates about future performance, including threats, losses, income sources, and an innovation strategy, all of which are subject to a significant lot of uncertainty.
Be conservative in your revenue and profit predictions, and include a comprehensive scenario and risk analysis to cover all of your bases. How to properly construct a fantastic business plan is definitely beyond the scope of this post, but don't forget that your franchisor may be a wonderful help with this. They will most likely have a sample business plan from which you may start.
Sign your franchise agreement
After you've completed all of the preceding steps and are still confident you would like to proceed, it's time to formally register your franchise. To authenticate your association with the franchisor, you must sign and file a franchise agreement.
In Conclusion
As a result, establishing a franchise needs much planning. Before you go headfirst into the franchise industry, be sure you've completed your research. It will almost certainly boost the chances of your company's success.
Purchasing a franchise is like purchasing any other type of business, you must conduct thorough research of the franchise. However, if you are well-suited for franchise business and choose the correct franchise, being a franchisee may be a quick way to achieve success.
References
Understanding What Is Franchising?
Related Posts
Featured Video:
New Entrepreneur Meets Ex-Entrepreneur
The Entrepreneurs Programme
