Advantages And Disadvantages Of Franchising

Anyone who is eagerly waiting to start a business of their own with the least risk in mind, go for a franchise without a second thought. Franchising has seen a boom recently, which is the reason why you can find a Levi Strauss store even in the smallest of towns. Not only clothing lines but franchises of supermarkets and well-known grocery stores are also very commonly found. Even educational institutions are not spared; you can find myriads of advertisements that pass along with your newspapers, calling for franchises. But what exactly is franchising? A franchise occurs when the owner of a business grants a license to another person or business, often called the franchisee to use their business idea. Now that the franchisee is free to sell the goods and services of the franchiser with the respective trade name or trade mark. The franchisee can benefit from it and increase the business under the franchiser’s shade. For the help that the franchiser provides, the franchisee is supposed to pay an initial fee and a percentage of their sales revenue as their business grows. The common franchises that you can find anywhere include, McDonald’s, Café Coffee Day, Montessori institutions like Euro Kids, Kidzee, etc.

Pros & Cons Of Franchising

The idea of starting a franchise has become so common that anyone who looks forward to making some easy money will jump to the idea of starting a franchise. As with everything, it too has its own advantages and disadvantages. If you are planning for a well-to-do business, you should be aware of the pros and cons of franchising and then decide whether to start a franchise or not. Have a look of both sides of the coin.

Pros:

You can be your own boss. At the end of the day you have started a business of your own and you are not answerable to anyone for the ups and downs of your business even if it is a shared business.
Since you are starting a business under the shade of the franchiser that had already made a mark in the industry, small franchises can flourish in that name and make good business profit out of it. It is the name and recognition that comes for free with the franchising.
Big businesses tend to make a neat profit through the small franchises. They give a good back up to the smaller franchises helping them in corporate marketing. Keeping interest in small franchises is nothing but a business tactic used well by the franchisers to have a good hold over the market.
A common saying in the franchise industry reads, “You’re in business for yourself, but not by yourself”, it is the franchiser who takes care of the initial costs. The initial stages of financial burden will be shouldered by the franchiser helping the franchisee to get the supplies and equipments as needed.
As mentioned above, the franchiser will be interested in the success of the franchise, so it will turn no stones unturned to help the franchise succeed. The franchiser will lend their hand in all kinds of training and assistance, like personnel training, site selection, and advertising.

Cons

Though the franchise is run as a small business, the franchisee will have to abide by the rules of the franchiser. For every decision that has to be taken the franchiser’s consultation and approval is a must. The authoritative control of the franchise owner will be limited.
When there are too many franchises, decisions made by the franchiser can be biased. Getting a firm deal from the franchiser becomes a rarity because of this.
Sometimes apart from the initial fee, the franchise will have to give a part of the revenue that they make every month. At times the franchise will be forced to get goods from the franchiser and not necessarily at the best price. This can affect the business profit of the franchise.

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