According to the International Franchise Association, franchises have over eight million people in their employ and every 8 minutes someone in the United States opens a new outlet. Additionally, of every twelve retail businesses one is a franchise. These are great statistics and clearly indicate that franchising is great business. However there are advantages and disadvantages to buying a franchise. Each person desiring to start a franchise must find out if this is the business for them and if so, here are some things that they should know.
Some of the advantages of buying a franchise are that a franchise is a system that has already proved that it works. One does not guess at whether the business will succeed or not. If the franchisee works the system, it will work. It is a great option for those with limited marketing and sales skills. Another great advantage of starting a franchise is that one has support from the franchiser.
He or she can share the challenges experienced and know that they will receive help from others in the organization. Therefore one is not thrown into the deep end to sink or swim.
An advantage that cannot be overlooked is that of acquiring a brand name. Market awareness has already been created and the brand is already well known. This in turn saves money as one does not have to convince customers to come to their establishment. It allows for that money to be poured back into running the business. When buying a franchise, most people do not know this, but the fact that the company already has collective buying power means that inventory and equipment is bought at a discounted price. The franchiser has much bargaining power with the suppliers.
That said the disadvantages of buying a franchise may include less freedom to be creative as they have to follow set operational procedures. Additionally, a franchise owner must share information on their finances. This is not so with independent restaurant owners. Moreover, there are royalty payments that must be made yearly for the support given by the main company such as advertisement and operations. Another disadvantage is that the franchiser may not give the franchisee all the resources needed to succeed. The startup costs are also higher because one is buying the franchise brand as well. The amount tends to be higher than most people can afford.
Another disappointment when buying a franchise may come in the franchiser not being able to give the needed field or market assistance. It may also lead to dependence on the franchisor to solve every small problem that may arise. For team players a franchise is a great idea, but those who like to do their own thing or go their own way may find it difficult to fit into the set guidelines that must be followed. If one finds that this is the right business environment for them, then they should go for it without fear. There is much help from the franchiser and there are organizations willing to lend the business person money to buy one.