Franchising can offer some tremendous advantages to those who are ready to start their own business but want to start with a proven concept.
Because franchise systems have already developed and refined a business idea and put systems in place for running the business, your job as an operator would be to learn their systems and implement them.
Executing a system within an already-proven business model with a brand name and track record can be very appealing compared to the thought of starting something from scratch. As a rule, franchises have a higher success rate than startups, and you may find it easier to obtain financing for a franchise than your own concept.
considerations for prospective franchisees
Although many see franchising as a simpler way to start, there are a few important factors you’ll want to consider. To maintain consistency across all locations, franchises tend to have pretty strict rules, and there is very little flexibility offered in the business direction.
You have little to no control over the brand and image of the company. You are impacted, for better or worse, by the performance of other franchisees, especially if they are located near you.
Financially speaking, the initial investment into a franchise system is rather high. You will likely have to pay the franchisor a monthly franchise fee, typically between 6%-9%. There may be additional monthly fees like advertising/marketing charges.
When it comes to growth opportunities, you may be limited to the number, or placement, of locations you wish to open. The Franchise Agreement you’ll have to sign may be limited-term contracts with stipulations surrounding re-signing for additional terms. You may find yourself in a disadvantageous position just when you are really starting to be profitable.
Most importantly, there is never any guarantee of success, not even with well known franchise brands. Still, entering a franchise system can give you a leg up compared to a new business concept in an untested market.
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