Start-up assistance in the form of training, advice, operational manuals, and sometimes, financing
On-going training and support from the franchiser
Association and synergy with other franchisees for help/ideas
Standardized/proven product and operational systems
Product or service with brand-name recognition
Collective buying power
Assistance with sales and marketing
Research and development support
Some independence operating their business.
Restrictions set by the franchisor (geographic, products, operations, vendors, etc.)
Franchisees must pay ongoing royalties and advertising fees.
The franchisor’s problems are also the franchisee’s problems (e.g., poor image, limited advertising, supply problems, franchiser’s financial difficulties)
The term of a franchise agreement is usually limited, and the franchisee may have little or no say about the terms of a termination.
Smaller profit margins
Challenging to achieve redress if franchiser fails to meet obligations
Selling you Franchisee – If you ever happen to sell your franchise to someone else, you must consider the fact that the buyer must be approved by the franchisor. You just cannot sell your business to any random buyer.
For the franchisor
Pros
Cons
Cost-Effective Expansion
Marketing Support
Additional Sources of Revenue
Acquiring Talented Managers
Speed of Growth:
· Reduced Risk of starting a new business
Capital Investment
Less Control
Costly Legal Action
Regulation
Investing in a Franchise Business
To invest in a franchise, there are a few critical factors/questions for the franchisor and franchisee.
For the Franchisor:
For the franchisee:
Can you market it?
Can you clone it?
Does it provide an adequate return on investment?
Can you support it?
What the business is and how it operates
The location of the franchise
The success of the franchise concept – the number of franchises in the UK and how financially successful they are
The strength of competition from other businesses
How long the franchisor – the company offering the franchise – has been in business and how financially secure it is
Levels of initial and ongoing costs
How much training and support you’ll get in setting up and running the business
Conditions and restrictions in the franchise agreement, including how long it will run and whether you’ll have the option to renew
To assess whether a franchise represents a sound business opportunity, you’ll need to consider:
The franchisor will probably give you an information pack, but you shouldn’t just rely on this. Ask questions and look for evidence of their claims.
Visit other franchisees and talk to them. Ask the franchisor for a full list of past and present franchisees, not just the two most successful ones.
Take advantage of other sources of information and advice. Ask your bank – they usually have franchising specialists. And make the most of other advisers such as Business Link, your solicitor or your accountant.
Now, is owning a franchise right for you?
While all business opportunities are different and can be hard to define, the main difference is that typically, when someone pursues a business opportunity, they are unlikely to receive the same level of support, training, or guidance that a franchisee receives from their franchisor. The initial years are difficult when starting it from scratch when opening your own business. In fact, according to a study, only 1% of new businesses have a chance of survival.
So when it comes to choosing from freedom of starting your own business or sense of security when opting for a franchise business, one must make decisions accordingly.
Conclusion
Starting any business is a risk, and there is no guaranteed success. All an entrepreneur can hope to do is reduce the risk of failure through careful investigation before making a commitment to a business venture, and franchising helps.
