Are you one of many who dream of being your own boss, but you're not sure you're ready to start your business from scratch? If so, then the franchise may be the right thing for you. It is a fantastic alternative if you are a businessman without much experience or resources, and could use strategic advice when starting your business. When you buy a franchise, you buy a portion of the franchisor's existing business, one that has preferably already established itself as a reputable brand.
A franchise is a commercial and legal partnership between two parties that trust each other; one in possession of a trade name, trademark or mark and the other interested in using the identification to start or manage a business. A franchise agreement establishes the terms and methods for these two parties to conduct business.
The franchisor provides you with a sound business plan, the internal structure of business administration, along with a service or product that you can sell, as well as training support, management advice, location analysis, and effective marketing strategies. All you need to do is pay the initial and ongoing fee for the right to run a business with your brand. The terms and conditions between the two parties are discussed previously and you enter into a commercial marriage.
The best way to decide whether entering into a franchise agreement is in your best interest is to study the advantages and disadvantages of this business decision. Do your due diligence. If you are not careful, you could end up losing a lot of money.
The advantages
Recognition: There are many benefits to becoming a franchisor. One of the biggest is that you are running a business that is already recognized by consumers. This eliminates the need to start from scratch and try to market or sell your business.
Financing: Because the franchisor has given you a proven business plan, it is highly likely that a bank will approve your loan application.
Guidance: Instead of risking learning how to run your business through daily experiences, the guidance that comes from a franchisor helps eliminate monetary waste and also smoothes the overall operation of the business.
Better purchasing power: Buying supplies as a collective entity helps keep costs down and therefore increases profit margin.
The disadvantages
The Cost: In addition to the preliminary costs, a large portion of your expenses will go toward purchasing the franchise. The cost generally varies from four to five figures. In addition, there are also the monthly royalty fees. These are commonly paid out of your earnings depending on a pre-agreed percentage. Be sure to study the entire fee structure of a franchise before purchasing one.
Your hands are tied: There is limited freedom when it comes to implementing your own ideas in running the business. You must follow an established manual, and if for some reason you fail to achieve your goals or deviate from the internal system, you risk losing your franchise along with everything you invested in it.
It's never really yours: Although running a franchise is similar to running your own business, it will never be yours to call your own, and it will still be much like working for someone else.
Look at the leader: Be sure to invest in a franchise that has proven to be reliable and durable. The last thing you want is for your franchisor to make the wrong financial or legal decisions that could compromise your business and, in turn, yours.
The franchisor provides you with a sound business plan, the internal structure of business administration, along with a service or product.