Buying a Franchise Pros and Cons
Buying a franchise pros and cons is a topic that has many good points on both sides. It's considered by people who are interested in having their own business.3 min read
Buying a franchise pros and cons is a topic that has many good points on both sides. Purchasing a franchise is a possibility considered by people who are interested in having their own business. A reaction that is currently seen more frequently in corporate employees who have been ousted of their jobs due to downsizing or working in horrible conditions is that they are contemplating buying a franchise for a new career option.
Having a franchise seems to be a lucrative business because according to the International Franchise Association, franchises have the ability to create jobs quicker than any other business, but there are other things to consider about owning a franchise. There are many different aspects involved in owning a franchise — not all of them are favorable, so it isn't for everyone.
Some Advantages of Buying a Franchise
A positive point of purchasing a franchise is the power and the history of the franchisor's business model. A compelling reason for buying a franchise is the average success of the franchisor and their longevity in the business. They have become successful because they have seen what works and what doesn't. A successful franchisor can provide valuable training to get any potential franchisee started in their own franchise, permitting the franchisee to take advantage of public knowledge of the franchisor's well-known name, reputation, and the advertising budget belonging to the franchise.
Business systems are established for franchisees to use, which can include computer systems, operating systems, marketing systems, and more. To assist the franchisee, franchisors can have brilliant marketing plans and advertising templates readily available, and having those valuable tools at hand can really help the franchisee get a quick start in the business. When prominent franchises contribute to market awareness and well-known brand names to franchisees, this will guarantee to help attract more customers faster, resulting in savings concerning customer acquisition costs and permitting more business operational time.
Benefits Franchise Owners Will Get From the Franchise
- Plot selection for favorable traffic flow and also taking into account the locations of the business' competitors
- Construction and design of the physical building
- Available financing to provide for initial franchise fees that include start-up costs
- Training that is provided by the franchisor to learn proven operational methods of the franchise
- Jump-starting the business provided by grand opening programs
- Regional and national advertising schedules to increase sales
- Learning routine business operations that are proven to maintain the best efficiency
- Having access to bulk purchasing agreements from previously approved vendors to keep down operating costs
- Continuing support of supervision and management if there are problems or questions
Some Disadvantages of Buying a Franchise
Buying a franchise that is a well-known brand name is often too expensive for many prospective business owners. A more realistic financial possibility is trying to have an independent business if the potential owner is determined to create a strong business operation. Contributing to the argument against buying a franchise is that every year, franchisees need to pay royalties to the franchisor in return for advertising and support in operations. Franchises are also obligated to conform to unchanging operating policies and divulge financial information.
The franchise system has rules in place to keep things functioning in a consistent manner. A franchise fee is required to be paid up-front, and this one-time investment, or per franchise unit, is the cost of entry into the franchise. A franchisee pays the franchisor a percentage of their gross sales every month, along with making royalty payments. The franchisee is also required to purchase the products and/or supplies from the franchisor. Sometimes, franchisors do not provide all the needed benefits for the success of a franchisee's particular location, along with the possible inability to give field or market support.
If you have any further questions about buying a franchise, the pros and cons that apply to this topic, and if a franchise is the right investment for you, the lawyers at UpCounsel.com are there to assist you. Post your legal need on UpCounsel's marketplace to ask any legal questions concerning this issue and how it can impact you.
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