Franchise Business Pros and Cons
Franchise Business Pros and Cons
Starting a franchise business might seem a business plan easy to start. After all, establishing a franchise means developing an existing brand in a new location with half the work done. However, there’s more to know before considering starting a franchise. Most importantly an entrepreneur will have to invest a large amount of time trying to figure out which franchisee business would be ideal to invest in.
Pros of Starting a Franchise Business
- The business name is already established.
- An established business means there will be an existing customer base or newer customers would come because of the brand name.
- An established brand serves as the biggest advantage for an entrepreneur to consider investing in a franchise. This enables the entrepreneur to just depend on the image of the brand to attract loyal customers hence it reduces the work to market and the introduction of the business.
- Most franchisees follow a regular supplier, therefore, the quality of the product each franchise set up has is the same.
- Most high-end franchise deals come with management and skill upgrade training.
- Most franchisees get to look at the trade secret and implement it without having to worry about developing a new strategy.
- Most often the franchisor spends time and money to develop and finalize on new products therefore franchisees can save on that time and money and straight away benefit from using the end product.
- The entrepreneur gets to be the boss and has to face a lesser amount of risks with franchisee model as opposed to starting and developing new business.
Cons of Franchise business
- A lot of research requires in deciding which business the entrepreneur can choose as a franchisee.
- A high-end franchisee business could cost a very high initial cost most often excluding the rental for space. The entrepreneur will have to pay a royalty fee which could be about 6% to 20% per year for the franchisee.
- A franchisee contract lasts for a ten year period or depending on the contract the entrepreneur gets into with the franchisor.
- Depending on the business an entrepreneur chooses, a franchisee would face a lot of restrictions on creativity. Some franchisors would not want any kind of changes done leaving the franchisee with no freedom or flexibility to decide or think out of the box.
- Some franchisors also insist to bring the stock or supply items from suppliers they know. Sometime the suppliers of such franchisors would sell stock at a very high price. This could prove not feasible incase the franchisee business is unable to attract adequate business from the area.
- If an entrepreneur does not run a lot of check before investing in a franchisee business then it is likely he/she is stuck for a long period with a disagreeing franchisor.
- If franchisee business comes with the perks of being well established and reputed it also runs the risk of attracting all of its franchisees a bad name if things go wrong with the franchisor in terms of business ethics or any other issues. Franchisees can earn an entrepreneur a lot of fame. At the same time any bad incident with the franchisor and all other franchisee stores have to share the same brunt.