Advantages and Disadvantages of Franchising

 Now that you know what a franchise is, you may be having one of two reactions. Some of you might think, “Why would anyone not purchase a franchise? The hard work is done, and what’s left is just basic business.” Others may think, “Why would you want someone breathing down your neck and telling you what to do? You may as well open your own business!”

Both of these points of view have merit, but neither covers the entire situation. As with any opportunity, business or otherwise, you owe it to yourself to become fully informed before entering into any sort of agreement. Very few things in this world are not mixed blessings, and franchises are no exception. However, there are many positive things about the franchising world.

Basically, franchising is wonderful for some and a disappointment for others. It’s up to you to learn as much as you can about the topic before deciding if it’s right for you.

The Franchise Advantage

Having said that, there are many fantastic advantages to franchising. Just a few of these include:

·  Decreased financial risk: You are not taking the entire financial burden on your own shoulders.

·  Detailed training: If you don’t have much experience in running your own business, you’re sure to appreciate the franchisor’s assistance and training.

·  Continuing support: When you hit a snag or problem, you always know you can turn to the franchisor for assistance. After all, they have a vested interest in your success.

·  Easily identified territory: You know where you’re supposed to target. Moreover, with most franchises, that means you’re protected from competition: they won’t allow another franchise to spring up next door.

·  Established name and brand: You don’t have to waste time building up your reputation; you’re working off the pre-established success of the franchise.

·  Reduced initial expenses: Opening a franchise is usually less costly than starting your own business. The franchisor usually has experience at startup and can help you avoid unnecessary expenses.

·  Quicker profit margin: Franchises almost always see a profit more quickly than an independent business.

·  Pre-approved business plan: A franchise is already a successful business, which means its business plan works. When you purchase a franchise, you get that pre-tested business plan along with it.

·  Shared marketing: Depending on the franchise, you may not have to finance your own marketing. Large franchises such as McDonald’s, for example, almost always do nationwide marketing, leaving you to benefit locally.

·  Product control: Not only do you not have to develop your own product, you can (generally) rest assured that your products will be pre-approved and of high quality.

The Franchise Disadvantage 

Of course, when you turn the cloud inside out, the silver lining hides a darker side. That isn’t to say that franchising isn’t a very good opportunity, but it does have its disadvantages as well: 

·  Royalties and fees: In addition to your own business costs, you will always have to pay an amount to the franchisor in royalties and fees. 

·  Limited growth potential: The same territories that protect you from competition prevent you from expanding your business without the franchisor’s approval. 

·  Lack of control: If the franchisor decides to make a change to operating procedures or products, you have no choice but to go along with it. 

·  Reduced profit: While franchises usually offer reduced risk and a quicker turnaround in terms of profit, there isn’t the same opportunity for massive success you might have in your own business. 

·  Selling: In many cases, you will not be allowed to sell your franchise until a set amount of time has passed. After that time, the franchisor has the right to stipulate who you can sell to. 

·  The name game: While brand recognition works for you, it can also work against you: Someone who had a bad experience at another franchise location may avoid your business because of it. It’s guilt by association. 

As you can see, there are both advantages and disadvantages to purchasing a franchise. There are, though, advantages and disadvantages to almost everything in business, so it’s not surprising that franchises be no exception. 

Of far more concern to you is the next chapter. It’s going to become less about the advantages and disadvantages, and more about whether a franchise is right for you.