Advantages and Disadvantages of Buying Franchise

Advantages of Buying Franchise

Advantages of buying franchise

Advantages of buying franchise

The following are some of the advantages of going for a franchise for your business start up.

1. Branding

The franchisor has established a well-known brand and awareness in the market. Customers are driven to purchase products and services they can trust. Franchises offer the familiarity and company reputation customers crave. The company has figured out the sales promotion strategy, advertising and marketing mix that will successfully drive customers to your business. Generating customer leads from an established brand is a major advantage of a franchised business.

2. Training

The faster you and your team are trained on what to do and how to do it, the greater your success. The franchisor wants you to succeed and provides the training and support necessary to make that happen. With a franchise you receive a tried and true road map to success. Learning by trial and error costs time and money.

3. Time

Establishing a business from ground up required time. Every detail demands focus and study, and mistakes can be costly. While independent start-ups can take years to reach critical mass, franchises typically cut six months to 3 years from that time, speeding your journey to positive cash flow and operational success.

4. Established Procedures

If your are new to setting up operations and procedures for a business, you will surely benefit from the established systems and procedures in place with a franchise business.

A franchise gains you access to traditional procedures in all aspects of business. You will be guided through location selection, facility design, equipment purchases and staffing.

Disadvantages of Buying Franchise

Disadvantages of buying franchise

Disadvantages of buying franchise

The following are the most common disadvantages or limitations of buying franchise.

1. Limited Control

If you want to pave your own way and do not want to be bound by established processes and procedures, franchising may not be for you.

2. Uneven Support

Not all franchisors are created equal. Some assist with start up operations, then leave everything else to you. Others offer widely varying levels of ongoing training and support. As a franchisee, you will want to look carefully at the support you will receive from a potential franchisor.

3. Start up costs

There are as many different investment levels for franchise businesses as there are franchises. Simple service-based businesses (franchisee and truck) will likely require a lower investment.

A franchise business that requires building and equipping a larger facility (think fast-food restaurant) would be an example of high investment requirement. Franchise fees may vary a great deal based on the franchise concept and number of franchise units involved.

4. Ongoing Costs

Most franchise systems require a reoccurring royalty payment. That is typically calculated as a percentage of your business revenue. Some franchises also required owners to contribute to a local or national advertising fund. Clearly before entering into an agreement you should be sure to know all those costs.

Conclusion

Buying a franchise business is one of the many paths to business ownership. You should carefully consider the decision to buy a franchise business. It is important to understand what you will get from your franchise investment, so take time to consider some important factors before you sign any franchise agreement.

In particular, be sure you are comfortable with:

  • Franchise concepts or business model.
  • Level of Support provided by the franchisor.
  • Type and size of the business in relation to your needs, experience, financial capacity and future plans.
  • Business performance of any existing franchisees, company-owned units and/or agents.

A franchise consultant can help determine if franchise is right for you.

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