Disadvantages and Advantages of Franchising

Disadvantages and Advantages of Franchising

This week, we had a lot of responses to Anthony R.'s query from last week, in which he asked for advice on how to decide which franchise would best allow him to realize his lifelong goal of becoming his own boss.

Others emailed me asking for my assistance in selling their franchises to Anthony R., while still others offered advice on how to choose a franchise and what to look out for.

Perhaps it's time to redesign that tired old business card. Franchise Broker Extraordinaire, Tim Knox It's possible that I could turn my idea into a franchise.

Last week, I said we'd go into some of the criteria you should use to evaluate a franchise opportunity in greater detail. It's important to remember that there are thousands of franchise opportunities, from those that cost a few thousand dollars to those that cost hundreds of thousands.

Numerous criteria, such as the opportunity's viability, the franchisor's track record and financial stability, the franchisees' success rate, and a dozen others, are represented in the price disparity.

A low-quality franchisor might only provide a training document and the use of their brand. Likewise, many franchise systems show little enthusiasm for eliminating unsuitable candidates. It's an unfortunate reality that many franchise businesses exist just to rake in money. They could care less if a franchisee succeeds or fails. The only requirements to become a franchisee are a functioning heart and a bank account. Your heart rate does not have to be particularly fast.

Franchisee requirements from the more prestigious franchisors are notoriously difficult to meet. They also take further measures to guarantee their franchisees' success. From the very beginning until long after the doors are opened, they are there to help in every way they can. Of course, their help does not come cheap, but as the adage goes, "you get what you pay for."

The Following are Some Qualities to Seek Out in a Franchise

setup and operation that requires no additional work from the client.

There are several franchise models because of this. Many of the greatest franchises will do everything from finding a suitable location for your business to having it built and equipped to recruiting, hiring, and training staff before handing over the reins and giving you the keys. In addition, they will stick with you carefully for the first few months after handing over the reins to make sure you know what to do.

Be prepared to do a lot of the groundwork yourself, as the vast majority of franchisees do not provide such comprehensive turnkey packages. It is often up to you to source a site, arrange a lease, construct a structure, fit out the interior, set up the machinery, recruit and educate workers, etc.

Successful Management With a Track Record

Many of the lesser-known franchise systems provide you with a training handbook, a training video, and a few hours of phone support, as was indicated previously. As a means of education in business management, this is not ideal. Any respectable franchise will offer you extensive management training, either at their headquarters or at your own location. There should be a strong emphasis on training, as one of the main draws of a franchise is the opportunity to benefit from the system's established methods and practices.

Clients Patiently Await the Opening of the Door

Even though I don't have any hard data on this, I'd be willing to bet the farm that as soon as a new McDonald's opens, the first Happy Meal will be sold. Brand awareness is a top priority for many franchise companies, so they regularly invest hundreds of millions of dollars in widespread advertising. This is beneficial for the franchisee since it ensures that they will have clients waiting for them the moment they open their doors.

Always Think of the Worst Case Scenario

As with every business model, franchising is not without its drawbacks. For starters, there's the prohibitive price of admission. It is common for the initial investment in a top franchise opportunity to be larger than it would be if the entrepreneur had launched the business from scratch. You could start your own burger fast food business for a fraction of the cost of opening a McDonald's franchise, but you probably wouldn't sell as many burgers.McDonald's offers more than just fast food in the form of hamburgers. What you're getting is an established name in the market, a loyal customer base, and a tried-and-true method of doing business. The price will be higher than you expect.

Another disadvantage of investing in a franchise is that you must send a portion of your profits back to the parent company.As part of your franchise agreement, the franchisor may force you to purchase certain items, such as inventory, documentation, software, computer systems, and anything else they deem necessary.

That is the most serious disadvantage of all.When you invest in a franchise, the franchisor, not you, is in charge of running the company. When it comes to the day-to-day operations of the company, you do not have much of a voice. Without exception, you must complete each step exactly as described.Further, if you ever leave the franchise business, you might not be able to sell it to just anyone. Before a sale could go through, the franchisor would need to give its stamp of approval to the new owner.

The main line, Anthony, is that you need to conduct your research to ensure that the franchise you invest in is a good fit for you.