Advantages And Disadvantages of Buying a Franchise
Description: Like many other businesses, franchising has advantages and disadvantages. You have to consider both sides before buying a franchise.
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Before you buy a franchise, there are things you must know about this business. Thinking over the advantages and disadvantages of franchising will help you to determine whether this business suits you best. One thing for sure, this business can be a feasible option to start your own business.
This article elucidates pros and cons of franchising from a franchisee's point of view. Although this business offers you many benefits, it also has some drawbacks that are worth further consideration. Here are the details:
Advantages of Buying a Franchise
The first advantage of buying a franchise is that you can start a business without any business experience. Franchisors have a solid system that will provide assistance and training before you are ready to open a store.
This assistance and training will be given regularly so you don't have to worry. Second, the benefits of franchising are that the risks of business flops can be reduced. Although in practice you have to manage your store by yourself, you are supported by franchisors whose ideas are proven and successful.
On top of that, franchising offers you a higher rate of success compared to a startup business. Third, you will get loyal customers based on brand recognition of your franchisors. If you buy a well-known and established franchise, you normally will get many customers from day one without excessive advertisement.
That franchisor already has access to national advertising and a loyal customer base. Last but not least, franchising offers you easier access to finance. If you want to buy a recognized and established franchise, it is more likely to get funds from the banks. It can of course help you if you don't have a sufficient budget to start and fund your business.
Disadvantages of Buying a Franchise
Since you sign a formal agreement with the franchisors, bound to them is the first disadvantage of buying a franchise. There are policies that you must strictly obey. Therefore, you only have a little space of creativity to apply your original ideas and expand your business.
Second, the shortcoming of franchising is that the costs you pay may be higher compared to a startup business. It means that you have to pay not only the initial fee but also royalty and sustaining management service fees. Furthermore, you usually have to buy products from your franchisor and sell them in your store.
Third, your store's reputation may be affected by the franchisor and other franchisees. No matter how well you manage your business, if there is any scandal that shakes the parent company, it will affect your business. It also applies when other franchisees have problems, especially regarding publicity and reputation.
Last but not least, there is almost no financial privacy for your business. Normally, the franchisors will collect your sales information to adjust royalty payments and improve their system and business model. Furthermore, all profits that you earn from your sales must be shared with your franchisor.
After looking at the advantages and disadvantages of franchising for the franchisees, you must be more cautious than before. Franchising is not always profitable. It depends on your hard work, decision making, time and staff management, and also customer service.