Franchises: Pros And Cons. Buying A Franchise Versus Starting From Scratch

Franchises: Pros And Cons. Buying A Franchise Versus Starting From Scratch

One of the first questions you must answer before starting a business is whether you want to become a small independent business or buy a franchise.

Each option has its own advantages and disadvantages, the type of business you choose depends on a unique set of circumstances.

 Let’s first see what Wikipedia says about this modality:

«The franchise is a type of contract used in commerce by which a party called the franchisor assigns to another called the franchisee the license of a brand as well as methods of doing business in exchange for a periodic fee or royalty.

Franchising consists of taking advantage of the experience of an entrepreneur who has achieved a significant competitive advantage in the market. That advantage may be a reputable brand name, proprietary products or methods, or simply a deep understanding of the business that makes you savvy in the formula for profit.

Through the franchise contract, the franchisor agrees to transmit part of these values ​​to the franchisee and the latter achieves a significant reduction in investment requirements as well as risk.»

Before making a decision, research the available options and narrow down the alternatives. Then have a chat with a few franchisees, both current and former (after all, someone who has retired from a business has interesting things to say that could open your eyes…).

Ask Yourself The Following Questions

Why Do You Want To Start A Business?

Is it because you want to be your own boss? If you want full control of your business, then franchising is probably not for you. A franchise determines the rules and guidelines that you must follow.

The policies imposed on the franchisee may include the suppliers, the way of advertising, the percentage of profit, and even the opening hours and, of course, everything related to the setting of the place, the way of attention, etc.

Looking For A Guide On How To Start A Business And Keep It Running?

A franchisor has taken the time and effort to develop a successful business model. It is a proven system that works in different locations in the country of origin and many times in others as well.

The franchisor can offer you business start-up information, training, and brand recognition. Since people are familiar with franchising, it will take you less time to establish a customer base than to develop an independent business.

Do You Want To Decide Your Own Rates For Your Service Or Product?

A franchise will most likely dictate the rates of dialing services and even the type of services or products that you can offer. If you want to expand your offer outside of your guide, a franchise may not be your best option.

Do You Feel Comfortable Training Employees And Maintaining All Required Documentation?

Since a franchise is an established business model, it will provide you with training material for your employees. The company will tell you what type of training each employee must take and what type of documentation you must take and file.

A franchisor will most likely give you all the descriptions of each job position and a guide on the salaries to offer.

Do You Know Where To Buy Your Supplies At A Good Price?

A franchise agreement may dictate the type of supplies and equipment to be used in the business. Since the franchisor buys on a large scale, hopefully, you can get supplies and equipment at a good price.

But keep in mind that you may be required to purchase supplies and equipment from certain companies, which will not allow you to enjoy quantity discounts and/or special promotions from other suppliers.

Are You Willing To Pay Part Of Your Monthly Income To Another Person?

Business agreements differ from franchise to franchise, but most will require you to make an initial investment plus a percentage of your income to the franchisor.

Additionally, in many cases, there are mandatory advertising fees to cover the costs of advertising campaigns. When you talk to other franchisees be sure to ask them if they feel they get

Do You Have The Necessary Marketing Skills To Promote Your Business?

Independent people are responsible for everything related to marketing, from having business cards, a website to support the business, promotional material (brochures, flyers, etc.), advertising in local media, campaigns, promotions, etc.

Do You Have A Specific Location For Your Business?

A franchise will surely determine the amount of business in a given area. You may even be assigned a territory to work in.

Remember, a franchise is a model ready to put into operation, you will have support so that you have your business up and running as soon as possible without the need to “reinvent the wheel”. However, a franchise has rules and procedures that you must follow that will, in a way, dictate what you can and cannot do with your business.

The way you want to develop your business should guide you in determining if you want to have an independent business or if you want to have a local branch of a national or international franchise.

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