Buying a franchise can be a great way to start your journey into the business way or a great way to expand your business horizon if you owned or still own a business. Before deciding if a franchise is the right new business idea for you or not, check out this article that will give you answers to some of the most frequently asked questions of those who want to enter the franchising world.
An Introduction To Franchising
The most common form of franchising is a business format franchising which basically means that the franchisor (the owner of the business) grants the franchisee (a person or business) the license to use its business idea.
In this type of franchise, the franchisee sells the franchisor’s products or services under the original trademark while benefiting from the franchisor’s expertise. The franchisee owns the outlet but there is an initial fee that should be paid and sometimes a percentage of sales. Also, the franchisee doesn’t have to right to chance the way the products or services are marketed and the franchisor have control over the way their business idea is used.
Advantages And Disadvantages Of Franchising
Before deciding if a franchise is the right business idea for you, you should consider the advantages and disadvantages of buying a franchise.
Advantages Of Buying A Franchise:
- It is easier to buy a franchise than to set up a business from scratch
- You can check if other franchise are successful before investing in a franchise
- The business idea is a proven business idea
- You do not have to invest in promoting the brand and the products
- You get support from the franchisor and that can include training, help with setting up the business, ongoing advice and tips
- Most franchisors do not sell more than a franchise in a specific region which means you have exclusive rights
- The risk of going out of business is reduced
Disadvantages Of Buying A Franchise:
- Costs can be high and you are forced to buy products from the franchisor or its suppliers
- You have numerous restrictions when it comes to the way you run the franchise
- If the franchisor goes out of business, you will also get out of business
- If you want to sell the franchise, you will need the approval of the franchisor
- The franchisor can change their business plan and strategy any time they want and you do not get any say in the decision process
- The risk of going out of business is reduced however, that also means you won’t generate a lot of profit
Before deciding to buy a franchise, you should also think about what type of business suits your lifestyle and work style. Running a franchise can be pretty stressful and it involves long hours, especially at the beginning. If you are the type of person that wants to be a business owner for the freedom and flexibility, a franchise is probably not a good idea since you won’t be involved in the business decision process. On the other hand, if you want to reduce the risk of running out of business and you feel more comfortable with an idea that is successful on the market, buying a franchise is the right new business idea for you.
Be sure to do a lot of research when it comes to the franchise you want to buy, make a list of questions to ask the franchisor, negotiate the contract if you have this option, choose a franchise you really like and make sure you and the franchisor are on the same page when it comes to business development.