Franchising: Advantages & Disadvantages


Is Franchising For You?

In today’s economy, many people are looking for new options for making money. It might be because they’ve lost their current job, or would like to find a more stable industry. One option you have is buying a franchise. But how do you know if franchising is a good option for you?

The franchise is a business relationship where a company, generally with an established name and sound customer base, sells the rights to operate a business under their name. The franchisee pays fees and runs the business. There are available franchises in everything from fast food chains to traveling science teachers.

Advantages of franchising

Name recognition – When you open a new business, getting people to start buying from you is often the hardest part. People often go to the same place for specific products and are unlikely to try something new unless they have a problem with where they currently go. With a franchise, people already know and like your product, and this saves you time and money on marketing your new business. This alone can often make up for the difference in initial start-up costs.

Mentoring – By working with a franchise, you get the benefit of having people around you who know what they’re doing and want you to succeed. This means they’re willing to help you establish your business, advise, and even guide you when faced with business-related challenges.

Reduced Costs – Suppliers always charge less the larger the amount of product you buy, which can be a severe hit for a small business owner. Because franchise companies buy products in bulk, reducing your inventory costs. Sure, you can’t shop around because you are required to use specific products. However, you’re still apparently getting a better price.

Ongoing Operational Support – After getting set up, you’re not alone. The option to call on experienced is comforting, after all, your success only adds to theirs. While building and running your business, you always have someone in the fight with you.

Disadvantages of franchising

Cost – The initial cost of setting up a franchise is extensive. Not only are there franchising fees, but you also have to pay for the other things involved in opening a business, for the location, construction, and supplies. Also, some franchises require you to pay certain costs out of your pocket, separate from any money you are loaned.

While it may be riskier than starting your own business, you’re also much more likely to get a loan to finance the startup. Small businesses are a risky investment for a bank, however, if you are purchasing an established franchise, you’re a much more sound investment to a monetary institution.

Lack of freedom – While it’s often great to have set up business products and practices already in place, this can present a challenge for owners with new ideas on how to improve and change things for the better. Franchisees work because everywhere you go, the franchise is the same. This eliminates much of your flexibility when it comes to your business.

Franchises are obviously not for everyone. It is important to look at your personality and preferences before becoming a franchisee. It’s also important to choose the right franchisor for your unique preferences and needs.

Bear in mind, there will always be the naysayers. You know the people who always have 10 reasons why something won’t work. Although they have never attempted it. Some of the very reasons people use not to start a franchise are all rhetoric and misconceptions.

Chime in, are you a franchise owner, ever thought about it, or tried it and it did not work out? Leave your comments and help to add credibility to the reasons for and against buying a franchise.

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