Franchising Versus Going It Alone: The Five Types of Potential Franchisee

Alan J Gibson, QFP, FCMI, is an experienced franchise consultant with the The Franchising Centre, a team that helps people turn their businesses into successful franchises. He will be providing us with blog articles for the next few months, and today he categorises potential franchisees into five different types:

As a bit of a gadget man I was interested to read about the launch of the new Google Glass eyewear. Google Glass is a wearable computer with a head-mounted display that enables its wearers to communicate with the internet via voice commands. With a price tag of over £1,000 it got me wondering who would buy a pair.  

After a little research I came across an article called the 'Technology Adoption Lifecycle'.  The article was based on research originally published in 1957 that describes the adoption, or acceptance, of new products or innovations, according to the demographics and characteristics of the adopting group.

It divides people into five key categories:

•    Innovators – risk takers that ultimately may experience failure.
•    Early Adopters – second fastest to adopt innovation.
•    Early Majority – adopting innovations after a varying degree of time.
•    Late Majority – sceptical of innovation and late to adopt.
•    Laggards – very traditional and generally the last to adopt if at all.

When it comes to Google Glass I think I may be an Early Adopter rather than an Innovator but, as I sit here writing this blog surrounded by my iMac, iPad, iPhone and iPod, it got me thinking whether the same categories may exist in the world of business, and in particular franchising.  

Based on my experience of matching franchisees up with their ideal business opportunity over the last 14 years I would suggest the following categories exist for

many people:

Innovators – Entrepreneurs in the true sense of the word. Risk takers with innovative approaches that sometimes lack the formal structure and process required for consistent success. Innovators are sometimes rewarded with great success but can also suffer a much higher risk of failure. An Innovator will normally feel constrained by the obligations and requirements of following a proven business format. This could lead to potential conflict with the franchisor and frustration for the franchisee.     

Early Adopters – Slightly less entrepreneurial than Innovators, Early Adopters come with a degree of risk taking and are ideally suited to newer franchise systems that provide franchisees with the opportunity to work collaboratively with the franchisor to prove the franchise. These opportunities normally come with incentives such as lower entry and ongoing costs and are usually offered as pilot or founder franchises. Pilot or founder franchisees will benefit from being pioneers; building long and lasting relationships with the franchisor whilst capitalising on early opportunities. Even though pilot or foundation franchise opportunities come with a slightly higher degree of risk, they should always be built on ethical foundations of a proven business format, with protected trademarks, sufficient profitability and a proven demand. The incoming franchisee should never compromise on these vital elements of a franchise business.

Early Majority – The Early Majority are normally the largest group of franchisees. More averse to risk than the Innovators and Early Adopters, they look for well-established franchise opportunities where the system is fully proven and can be verified through the due diligence process by speaking to existing and past franchisees. The Early Majority see the benefits of following a proven business format and system with clear processes and procedures that, when followed to the letter, produce the results expected of the average franchise business owner. Immediately joining a family 'network' of franchisees is comforting and plays to a sense of belonging.

Late Majority – People falling into this category can have a higher risk aversion and are generally sceptical, only considering the franchise after the majority of people have taken and proven the opportunity. They tend to seek greater validation of the system than those in the Early Majority category and sometimes favour franchise resale opportunities. Franchise resales occur when an established franchisee decides to realise the value of their business and sell their franchise, as part of their exit plan. The incoming franchisee normally pays more for the business than if it were a new territory, dependent upon the perceived value of the existing client and customer base, any assets included in the sale and the expected future growth potential. The incoming franchisee has a much greater opportunity to review actual performance of the business and undertake the appropriate due diligence. The incoming franchisee will still be required to meet the franchisor's current qualifying criteria before being awarded the franchise.

Laggards – People in this category are the last to adopt and sometimes never cross the line to become franchise business owners. They are highly averse to risk, traditional in their approach and tend to procrastinate to the point of inactivity. Many Laggards find it more secure to remain in employment, whether they find it stimulating or not, than embark on their own business venture, even with the support of a franchisor. Without confidence, support, drive, determination and enthusiasm, Laggards will struggle to perform even with the best franchise opportunity and should avoid investing in a franchise.

With a reported 930 franchise systems in the UK, there is a huge range of opportunities to choose from. My advice to prospective franchisees is to fully evaluate their personal qualities, through psychometric tests, personal reflection, and feedback from trusted advisors and friends, and then decide which category you fall into and what opportunity best suits you.