The franchise business model is not for everyone. There are plenty of limitations as well as benefits associated with this approach. Undoubtedly the biggest drawback for many is the lack of control, while the main advantage is probably the reassurance of buying into a business that is proven to work. Let’s take a closer look…
Related: The History Of Franchising
An Established Brand And Customer Base
Instead of starting a completely new business with no traction in the market, you are buying into a well known brand that already has a loyal band of customers.
The hugely expensive and time consuming task of marketing your business is often done for you as part of a wider national campaign. Marketing materials can also be provided for local campaigns.
Reputable And Reliable Suppliers
Rather than building your business from the ground up, you can benefit from established relationships with suppliers that provide all the raw materials your business needs.
Business owners cannot expect to be experts in every area of running a business. As a franchisee, the support you need is on hand.
Many of the franchise opportunities out there provide the management and technical training you’ll need to run the business in the established and expected way.
Some franchisors provide funding or a credit facility to give franchisees the assistance they need.
Ongoing Research And Product Development
It is in the franchisor’s interests that your business is successful. As such, you’ll benefit from a regular stream of new products or improved processes to keep your customers happy.
Be Your Own Boss
For many franchisees, this business model provides the perfect compromise between reduced risk and being the master of their own destiny.
All these factors combined mean buying a franchise from an established brand is less risky than starting a business from nothing.
The initial cost of some of the better known franchise operations can be large when the start-up costs and franchise fees are factored in. In many cases, it would be cheaper to start your own independent business.
You will have to pay a percentage of your turnover in royalty payments to the franchisor, thereby reducing your earning potential.
Marketing And Advertising Fees
Some franchise agreements will ask for fees for the marketing and advertising support you receive.
Limited Management Control
Your ability to make decisions and manage the business as you see fit will be limited by the exacting standards of the brand.
Limited Choice Of Suppliers
Franchise contracts will often stipulate that supplies can only be bought from an approved list of suppliers, sometimes at a higher cost.
Locked Into Long Term Contracts
Fail to do your research thoroughly and you could find yourself locked into a contract with the wrong franchise.
Reliant On Franchisor Success
Your business can only be as good as the reputation of your parent company. Any difficulties they experience could impact on you.
No Guarantees Of Success
While opening a franchise does reduce your risk somewhat, there are still no guarantees of success.