Entrepreneurship is a tempting opportunity: why not become the owner of your time, resources and ideas? True, it is also a huge responsibility and often a huge investment to start something, especially in areas like opening a shop or cafe.
A much easier way than creating a private label is to purchase a franchise, which is becoming an increasingly popular way to start your own business around the world. Franchises may be different, but they all have one thing in common – it’s a business built on relationships – with the franchisor, his team, customers and the local community.
Legally, a franchise is an agreement between a brand owner or franchisor and a local business owner or franchisee that grants the franchisee the right to trade in a specific location using the franchisor’s brand and concept. Creating a business with a franchise instead of creating a new brand has a number of advantages for both the franchisee and the franchisor: the franchisee does not have to think about starting a business, developing a concept and attracting customers, he receives a ready- made business with a well-known reputation, while the franchisor gains wider brand recognition, a more efficient organizational structure and higher turnover. You have to create a private business from scratch, but a franchise is a ready-made, tested and refined model of a business concept that you can buy for a relatively small investment and start earning right away.
However, like any business, franchising is a relationship business. Those who want to start this form of business need to be sure they love what they are doing. Not everyone can be a seller and not everyone feels like fish in the water in this environment. I would like to say even more: small businesses and especially franchises today are much more than just a way to make money. They can and want to do more by actively participating in the life of the local community. “Narvesen” is also a franchise: currently there are a total of 135 “Narvesen” franchisees operating in Latvia, which maintain 210 stores. 96% of them expressed their belief in the survey that the work done in their city and local community is important and meaningful.
Small businesses are ready to hire much more today than they were ten years ago and are also actively involved in improving the life of the local community. For example, 44% of our affiliates expressed their willingness to organize and improve the environment around their point of sale – to plant plants, arrange seats, bicycle sheds, etc., 22% – to financially support a important initiative for the local community, 19% – to organize an entertainment event for the public at their point of sale, for example children’s day, etc. etc. Business has long ceased to mean just standing at the cash register and writing checks, but building human relationships and meeting customer needs, taking into account that they are as diverse as the franchisees themselves.
Franchising is very popular all over the world. Its main attraction lies in its low risk. To open your bar or shop, you have to expect an investment of at least 50,000 euros, but in the case of a franchise, the franchisor covers the entire burden of starting a business. According to research and experience, 95% of franchisees are successful, so the risk of failure is minimal, because the franchisor comes to the rescue in difficult situations. This could be seen during the Covid-19 restrictions, when many outlets ran into difficulties due to declining customer traffic and the franchisor became a safety cushion to prevent these outlets from closing. This is especially important at this time when the burden of expenses is increasing due to the increase in the price of energy resources and the expenses are sometimes higher than the income.
In the last decade, since the franchise business has developed in Latvia, competition in the convenience segment has increased several times. This trend can be observed all over the world: eight of the world’s TOP 10 franchises are in the convenience and fast food segment, for example McDonalds, which is one of the top franchises in the world, also KFC, Burger King, etc. But this is not a reason to give up, on the contrary: it favors development, adopting the best global trends, being a step ahead of competitors.
One of the trends that is spreading fairly quickly is multi-franchising – it means that a franchisee has multiple stores under its control. Multi-franchising gives you the opportunity to swim in wider waters, develop personal and team skills, as it requires greater responsibility and greater organizational investment. Historically, in Latvia, we have focused on monofranchising, a model in which a franchisee has a store, although some of the most successful and courageous entrepreneurs have previously worked with several outlets.
If we look at the experience of neighboring countries, Scandinavia has much older and stronger franchise traditions, however, it cannot be said that Latvia is somehow not keeping up with more experienced colleagues. There are only small differences: for example, the Swedes are more cautious and focus on the monofranchise, while the Danes prefer to choose the multifranchise format, towards which we too are progressively moving. Latvia has almost the biggest differences with its closest Lithuanian neighbors: in Lithuania, not so much street shopping is dominated by franchised cafes.
Sometimes the franchise even turns into a family business: the first franchise is bought by the parents, later it is continued by the children. Franchising is truly an opportunity for everyone who wants to be successful and work with joy and profit.
What should it be prepared for? First, take responsibility. Secondly, collaboration skills are needed, because you will have to collaborate a lot not only with the client, but also with the franchisor. Thirdly, you will have to learn all the time, because changes in the business world are daily: you have to introduce new products, you have to adapt to current events and trends.
You should also be prepared to take risks for the development of your business, even if the rest of the risks will be covered by the franchisor. Finally, an understanding of the business is required, but this is also aided by the franchisor to acquire and improve. And perhaps the most important thing is to work hard, but do it with pleasure. Whether it’s a private label or a franchise, what is grown and nurtured with love becomes greener and greener.
