Entrepreneurship and Franchisors

Entrepreneurship and Franchisors

Entrepreneurs and franchisors are often compared, but there are some fundamental differences between each business model.

Entrepreneurial Model

The basic structure of an entrepreneurial model of business is that the entrepreneur or group of entrepreneurs creates the business concept and structure. Then the entrepreneur and their employees execute the business plan. Entrepreneurs consider being their own bosses a major advantage of this model.

Franchise Model

Franchising shares many aspects of the entrepreneurial model. Both involve businesses that offer goods and/or services for sale, but franchises are structured with multiple locations that are contracted to different proprietors. These proprietors run and administer each unit or set of units, which are all owned by the franchisor. All franchise units must adhere to the same rules and principles to enable them to function in a uniform way.

Entrepreneurs vs. Franchisees

Both entrepreneurs and franchisors are in charge of the day-to-day running of the business: hiring and supervising staff, ordering inventory, marketing the business and keeping track of business’s financial records. However, franchisors offer extensive training for all of the above aspects of the business. Entrepreneurs have to figure things out on their own. Franchisees receive a significant level of support from the parent company, whereas entrepreneurs typically receive minimal support.

Planning and Research

Entrepreneurs need to write a detailed business plan, including the location, products/services, staffing supply costs and funding needed to open and run the business. This business plan helps you get financing from banks or investors. Alternatively, franchisees research various franchise opportunities to see if any fit with business goals. Franchise research includes looking at all aspects of the franchise business including financials, track records of existing franchises and growth of the parent company over time. Once you choose a franchise to license, you still need to find an acceptable location and get financing, though it might be available through the franchisor.

Preparing to Open

Entrepreneurs must first build their business, sometimes from the ground up. You then need to hire staff and train them before opening. You’ll also have to find suppliers and get the word out. As a franchisee, you’ll build your business so it looks and functions like the other franchise units that already exist. You would be trained by the parent company on how to run the unit, including which suppliers to use and how to train and hire staff. Some franchisors even provide trainers from the parent company.

After Opening

Problems always happen when you run a business. Staff turnover, supply chain problems and the need for more customers are just a few problems that can happen soon after opening a new restaurant. Entrepreneurs’ time is often consumed with trying to solve problems like this, and if these issues aren’t resolved, the business could fail. As an entrepreneur, it’s up to you to find additional financing from banks or investors. Franchisees receive ongoing support and assistance from the franchisor and parent company. When you run into trouble as a franchisee, you can usually get additional financing from the bank or franchisor without too much difficulty.

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