Advantages & Disadvantages of Buying a Franchise

Franchise 101

As with any business opportunity, there are advantages and disadvantages to take into consideration when selecting whether or not something is right for you. Franchises are popular investment opportunities for individuals from all backgrounds around the world. Before making an investment decision, it is important to understand both the pros and cons of each franchise opportunity as well as the idea of a franchise all together.

Franchise Pros

  • Reduction of Risk- While franchise opportunities come in all shapes and sizes, many are regional, national or international brands that are well established and using the franchise method as a way to expand. Associating yourself with a well proven brand that has proven systems and structure will help to reduce your investment risks.
  • Standardized Products, Systems and Operations- One of the many challenges that small business owners face is developing new products, systems and operations so that they can continue to grow and compete within a marketplace. Affiliating with a franchise allows the franchisee the opportunity to plus into each of these things without having to create or invent them on their own.
  • Standardized Tracking, Accounting and Financial Systems- Yet another challenge for many small business owners it tracking results for the operation as well as managing the financial and accounting for the business. A franchise provides these systems and structure to the franchises upon their initial investment, allowing them to focus on marketing and growing the business instead.
  • National, Local and Plug and Play Marketing and Advertising- Most business owners do not fail due to lack of skill, they fail due to lack of revenues. Many larger franchise opportunities will provide their franchisees with either plug and play marketing and advertising programs or these in combination with larger regional and national programs.
  • Support- Running a business often requires ongoing support and training. Franchises offer supervision, consulting and ongoing training to their franchisees, giving them the support that they need to be successful both in the short term and on an ongoing basis.

Franchise Cons

  • Loss Of Control- Working with a franchise has many structural benefits provided to the franchisee, but it also can mean that the franchisee will have little to no say in their business model or business methods. This can be advantageous to business owners who have little experience, but at the same time, can be frustrating to those entrepreneurs who are seeking flexibility to make decisions.
  • Contractual Agreements- As with any legal agreement, there are binding agreements signed between the franchisee and the franchise. It is important that these agreements are fully understood prior to their execution.
  • Part of the Whole- Just as if you were to be a division of a larger corporation with your own location, the problems of the corporation will also affect your unit. So, while you own your unit as a franchisee and can make day to day decisions, the decisions of the parent franchise will affect you directly and it is important that as a franchisee, you are kept abreast of any and all news and changes on an ongoing basis.

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