Know Pros and Cons of Franchising before Buying
One needs to be aware of pros and cons of franchising before getting in to it. There are lots of decisions involved before you decide to focus on franchising to make money. From choosing the type of business to choosing the type and amount of investment required. Making tons of other decisions in between requires a lot of thinking and judgment before taking the big leap.
Pros of Franchising
- A franchise is often a well-known and reputed company, therefore it is easier to build relationships with customers.
- The business’ marketing brings in customers to the franchise. Thus there is often no need for separate marketing or at least a lot of it.
- The company headquarters also helps build a good relationship with the vendors to take care of franchisee’s needs.
- The mother company is always there for the franchisees.
- The basic training and orientation is provided by the company itself.
- Some owners also help franchisees get loans and credit.
- Franchisees only need to support the company’s strategy with good sales and services. The main company then takes care of all the other things such as new products, improved products, major marketing strategies, etc.
- It is often a lot easier and less risky to manage a franchise than handling your own business from scratch.
These were the advantages. However there are certain disadvantages too.
Cons of Franchising
- To begin any business or to start up franchise, there is often lot of money required.
- The profit you make needs to be shared with the business owner.
- Some of the companies also ask the franchisees to pay to get the support of marketing.
- The franchisee doesn’t have a say in many decisions. He or she has to follow the rules set by the franchisor.
- Being a franchisee doesn’t promise sure shot success or profit.
- Franchisees are bound by the suppliers’ list provided by the franchisor, even if those suppliers are more expensive than others
- It is not easy to shift franchisors. If you choose the wrong franchisor once, you might be bound to be with him for years depending on the contract you sign.
- You might do good business. But your success is largely dependent on the business owner’s overall business goals and profit. Your business reaps the benefits of his reputation.
Before signing the franchisee contract, keep in mind the above-mentioned 8 advantages and disadvantages of being a franchisee. Seek the consent of your family. Discuss the legal papers with a financial and a legal advisor for better understanding. Given the above conditions, if you think you can manage it well, then go ahead.
About The Author
Alam Qureshi is a Certified Business Intermediary (CBI), Certified M&A Professional and Broker of Record at ProClient Brokers Inc., Brokerage. He helps franchisors in expansion of their brands and assist franchise buyers find right franchise in their situation. Call us 416 364 5550 or CONTACT US to get in touch.
Date modified: 10-27-2019