WHAT ARE THE ADVANTAGES AND DISADVANTAGES OF OWNING A FRANCHISE?
“Owning a franchise allows you to go into business for yourself, but not by yourself.”
A franchise provides franchisees with a certain level of independence where they can operate their business.
A franchise provides an established product or service which may already enjoy widespread brand-name recognition. This gives the franchisee the benefits of a pre-sold customer base which would ordinarily takes years to establish.
A franchise increases your chances of business success because you are associating with proven products and methods.
Franchises may offer consumers the attraction of a certain level of quality and consistency because it is mandated by the franchise agreement.
Franchises offer important pre-opening support:
design and construction
Franchises offer ongoing support:
national and regional advertising
operating procedures and operational assistance
ongoing supervision and management support
increased spending power and access to bulk purchasing
The franchisee is not completely independent. Franchisees are required to operate their businesses according to the procedures and restrictions set forth by the franchisor in the franchisee agreement.
These restrictions usually include the products or services which can be offered, pricing and geographic territory. For some people, this is the most serious disadvantage to becoming a franchisee.
In addition to the initial franchise fee, franchisees must pay ongoing royalties and advertising fees.
Franchisees must be careful to balance restrictions and support provided by the franchisor with their own ability to manage their business.
A damaged, system-wide image can result if other franchisees are performing poorly or the franchisor runs into an unforeseen problem.
The term (duration) of a franchise agreement is usually limited and the franchisee may have little or no say about the terms of a termination.