Disadvantages and Advantages of Owning a Franchise

Franchising is one of the fastest and most effective ways to expand a business. It’s also a great way to break into the business world with an established brand. What franchising does is let big companies sell branches of their stores to individual buyers. It is a beneficial relationships for both parties involved, for the brand owners because they are able to set regulations on the franchise stores and the franchise owner because they are able to take advantage of owning a already successful brand. While it is a great business venture., there are certainly some things to consider when making the decision on whether or not to get involved with a franchise.

Advantages of Franchising

1. Practice Makes Perfect
For over two hundred years, people have been using the method of franchising to expand their business. The method has been tried and tried over again, and with each passing year the process gets a little bit better. Multiple companies, like McDonald’s, have used the method of franchising to build a world wide empire.

2. Hands Free Marketing
One of the biggest components of running a successful business is staying on top of marketing and innovation. With a franchise, you don’t have to do either of these things. The brand who owns the franchise handles all things, including marketing and new products. You are able to receive big time marketing, without having to fork over any of the money for it.

3. Minimum Risk, Maximum Benefit
Expanding a business is the most vital part of it’s success. By spreading your stores, you are expanding your customer base and gaining recognition. Franchising is perfect for this because you are able to expand your business without footing the bill. The people who want to own your franchise pay all of the initial costs it will take to construct and run the business, expanding your business for you.

4. No Starting From The Bottom
One of the biggest benefits to opening a franchise is that it let’s you own a business without having to start at the bottom. Everything you need to have and know about the store is laid out for you, and you are even offered assistance to help you get things running smoothly. Since franchises are generally big time and well known brands, you also do not have to worry about getting people into your store, they will come simply because of the name and products.

5. There May Be Help
Many companies that offer franchise opportunities also offer financial assistance programs as well. This means that they will help you to open and start the business, and you pay them back once the business becomes profitable. This makes franchises a realistic business option for just about anyone.

Disadvantages of Franchising

1. It Isn’t Cheap
By far the biggest obstacle associated with opening a franchise is the amount of money that it can cost. Many companies, especially very well established ones, charge a pretty penny to open up and represent them in one of their stores. This is the biggest problem most people have with franchises.

2. Contracts Are Tricky
Another thing that you have to consider when making the decision whether or not to invest in a franchise is the fact that you are required to sign a contract with the company. These contracts lay out all of the power that you have within your store, and what you can and cannot do. These contracts must be renewed after a certain amount of time, which is set by the company, and if the company feels you are no longer suited to run the company, they do not have to renew your contract. All of you investment is lost if this happens.

3. Less Control Over Your Business
By letting other people come in and run branches of your store you are relinquishing a large amount of control and power. These people are representing your entire brand, and a problem in one store could easily come back to bite the main company in the butt.

Important Facts About Franchises

  • By far the most successful and rapidly growing type of franchise are fast food restaurants.
  • 8.8 million jobs in the United States are from franchise positions.
  • Singer Sewing Machines, founded by Albert Singer, is one of the first modern day franchises.
  • McDonald’s is the most recognized brand in the world.
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