Franchising has become increasingly popular in Singapore, especially in child care and education. It is an excellent idea for people who have been in the business before and wish to go with a bigger brand. It also works great for people going into business for the first time, but it will be a steep learning curve.
However, before opting for a learning franchise, consider the pros and cons:
Pros Of An Education Business Franchise
Existing Business Plans
Preparing a business plan can sometimes be challenging and overwhelming, especially when new. The parent business already has a business model that works for them, and they hope that if you follow it, it will work for you too.
Franchisors have also tested the business model in different environments. This is why franchises have a low failure rate. The model has been tested and proven successful.
It Is Easier To Get Financing
Startup entrepreneurs need help to get financing because most financial institutions are skeptical about giving loans to startups. This is primarily because of the high failure rate of startups, estimated to be 30% in the first three years.
Franchising is much easier to finance because you have the backing of the franchisor. Sometimes, the parent company has an in-house financing option for those who qualify for the franchise. Of course, they loan the money at an interest, as any bank would. However, what’s essential is entrepreneurs have financing to make their dreams a reality.
You Don’t Need To Have An Experience In Franchising
Many people shy away from franchise opportunities because they lack experience running an educational franchise. However, most franchisors will not demand this. Most education business franchisors in Singapore provide training and management support once you are confident you can do so without their help.
They are also at hand to help you overcome challenges. After all, any failures reflect poorly on the brand, so they try their best to ensure all franchises operate within a specific framework.
Records Of Why Some Franchises Failed
Failure is common in business. Unfortunately, reasons for the failure are usually not open for scrutiny, especially if the business owners do not acknowledge these reasons. Franchisors are keen to understand why franchises fail. This is in a bid to ensure it doesn’t happen again.
For example, if the problem were the location, if you came up with an idea for the franchise in the same area, they would discourage you and explain why you should opt for a different area. This will save you from losing your investment and wasting time on a project that will not work.
Cons Of Franchising
High Investment Costs
When going into business, you often determine how much you wish to spend and try and stick within those frameworks. Franchising is similar, but the costs are often predetermined. For example, the franchisor will dictate that you need at least $300,000 to acquire the franchise.
If you don’t have it, they will move on to the person willing to invest that much and more. Additionally, suppose you are getting financing from the franchisor. In that case, the interest rates may not be pegged on the current commercial lending rates but may be based on historical data and the franchisor’s profits.
Strict Guidelines
Franchisers may own the business, but they don’t have absolute control over how they run it. They have to abide by the strategies stipulated by the franchisor. If the entrepreneur wishes to make some changes, the brand must approve them. This is mainly done to ensure all the branches offer similar services and the quality is standardized.
Franchise Owners Are Not The Final Decision Makers
To most people, owning a business allows them to be their boss. To make decisions as they deem fit while others follow them. Franchises don’t work that way. Decisions are not 100% owned by the business owners and sometimes may be overridden by the franchisors if they see it unfit for the brand.
Franchising has its advantages, but it is not for everyone. Before taking advantage of learning franchise opportunities, you must understand what you are signing up for and if you are comfortable giving up partial control of your business to the brand you represent.
