Pros and Cons of a Franchise Business

The whole idea of a franchised business is that instead of planning for the whole business, you choose a business that’s already established success and use its brand name while following the original owner’s instructions. Starting your own business, however, is starting from scratch and enduring all the responsibilities.

And taking such a step can be hard. That’s why Franchising is mostly considered as the best choice. For many entrepreneurs, Franchising is the chance to be your own boss without bearing the significant risks that any start-up would go through.

While it might seem easier and cheaper to start a franchise business rather than start a new business, it still requires a lot of effort, study, and monetary investment to be successful.

Do not forget to follow up from a business conference.

Pros and Cons of Franchising:

The rate of success when opening a franchise business is known to be significantly higher than any other start-up. But still, it doesn’t mean that franchising guarantees a successful business. Before you decide to franchise, you have to fully understand its disadvantages before its advantages.

Disadvantages of a Franchise:

  • High initial investment: The initial investment of a franchise depends mainly on the size of the original business, which makes the investment huge when you’re considering big franchises. However, there are a number of franchises that fall right into any budget and would be perfect for you. While researching, you need to look closely at the monthly royalty fees that some franchisors require, which usually ranges between 4 to 6 percent of your gross sales revenue.
  • Limited creativity: A franchise is a predetermined brand, so there are a lot of limitations when it comes to altering, improving or even exploring the brand. There are plenty of restrictions for a franchise as the franchisor has control over almost all your business decisions. From what products you can sell to which suppliers you can use and even where to locate your operations.
  • Corporate shared financial information: Your business would have no financial privacy, as the franchisor will continuously collect all your financial information to audit royalty payments and keep improving their business model. This can sometimes work for your own favors, as the best franchise will also share a lot of information with you. And that can help you in improving your financial performance and increase your business profitability.

Advantages of franchising:

  • Lower risk: Franchising is a more secure way to invest your money than starting a completely new business. You’ll be receiving more support from well-experienced parties. Since franchises have already proven a high success rate, it would be so much easier to get a franchise loan than if you try to get a loan for an independent business. Such businesses have already proven its success over the years, banks understand that’s it’s a safer bet to invest in a franchise than a startup
  • Brand recognition and Customer base: One of the main reasons people tend more to franchising is that you can start with an existing customer base. Your brand is already recognized in the market. A lot of effort goes into branding your business. But having such a backup will save you from all this effort which will accelerate your path into profitability.
  • Franchisor support: It’s a priority for all franchisors to support their franchisees. By training them on the highest levels to be able to represent their brand. It doesn’t just stop here, they also offer assistance with all types of pre-opening operations such as site selection, design, and constructions. Some franchisors even offer loans and financial assistance to their franchisees.

A full understanding of the previous factors is your key in determining if franchising is your best option or not.

Becoming your own boss

They say when it comes to franchising “you’re in business for yourself, but not by yourself” which perfectly explains the idea of franchising. You’ll be starting your own business and becoming your own boss and still be getting all kinds of help and support managing it.

Whether you’re in need of a more flexible schedule or if you want to work from home, you’ll be having more autonomy over your career. If you need any kind of assistance or if you have a question about a certain product, supplier or even your budget, you’ll be able to consult with your franchisor to get your answers.

It’s exactly like starting your own independent business. You’ll also have all the control you need over your destiny and career path, but with a backup system to help you achieve the results you’re seeking and your goals.

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