Franchise Advantages Disadvantages

Franchise Advantages Disadvantages

Franchise advantages disadvantages - Traditional franchising is an established business technique that brings together the owner of a branded product or idea with another. A franchisor provides a trademark or trade name and a very specific business arrangement; a franchisee pays a royalty and often an initial fee for the right to do business under the franchisor's name and system. The contract binding the two parties is the franchise.

Buying a Franchise Advantages and Disadvantages

Advantages of a Franchise

  1. Established name recognition

  2. Cooperative marketing

  3. Bulk purchasing power

  4. Training and management expertise
They are some early advantages of buying a franchise rather than building your own business. They're the types of advantages solo entrepreneurs might reap -- if they're lucky -- after years of hard work in the trenches.

Disadvantages of a Franchise

  1. Naturally, franchising has its drawbacks, too. Agreements between franchisors and their franchisees can seem pretty rigid, especially to eager, innovative self-starters who expect to grow their companies as they see fit. However, a growing number of savvy franchisees are learning how to manage creatively and profitably -- within the established rules of the mother company.

Checklist for New Franchise Opportunity for Prospects

The following list covers the principle areas you want to investigate during the selection of a Franchise:

  1. Training Programs--You need to determine how well the initial training programs and support prepared the franchisees for opening and running their business.

  2. Opening Support--How easy did the franchisor make the process of getting the first unit open and operating? Was there assistance in site selection, lease negotiation, construction and design assistance, financing assistance, permits or any other factors unique to getting this business up and operating?

  3. Ongoing Support--You want to know how effective the ongoing support services of the franchisor are in terms of helping franchisees deal with the problems that come up in the running of their business.

  4. Marketing Programs--Most franchisors collect marketing dollars from every franchisee into a pool that is spent to promote the brand. You need to know whether the franchisees are happy and supportive of the way this process is handled.

  5. Purchasing Power--Does the franchisor use the collective buying power of the total system to get discounts on supplies and inventory beyond what an independent operator could achieve?

  6. Franchise Relations--Determine what the franchisees feel about the franchisor in general. Is the franchisor supportive, focused on their success, responsive, effective, organized, and trustworthy?

  7. Investment-- Use the franchisee discussions to narrow that down to a reasonable and conservative estimate of how much capital you will need to be successful in this franchise.

  8. Earnings--It is critical that you have a strong sense of just where the average unit is in terms of earnings.

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