Franchise Business - Pros and Cons

You have decided to buy a franchise opportunity. Which business franchise will you choose? There are so many out there. Are you going to go for a coffee shop franchise or a fast food outlet? What about an internet business, printing franchise or stationary?

What are the advantages and disadvantages of franchising?

There are distinct advantages in buying a franchise over starting your own business from scratch. The greatest advantage is that most franchises are still trading after 3 years whereas most new start ups have ceased trading.

What is a franchise?

With a franchise you benefit from a proven business model and the experience of a larger organisation. You have to pay a franchise fee and a license fee to the franchisor to have the right to run their business model.

In the UK companies like McDonalds, Prontaprint & KFC made franchising very popular in the 70s. Now you can find an outlet in nearly every town & city in the UK. Franchising is now one of the fastest growing areas of business in the UK.

Let's examine the pros and cons of franchising

The advantages are:

1) You receive full training in the operation of your business
2) You are not reinventing the wheel
3) You receive support from the franchisor when you encounter a problem
4) You have a proven business model
5) It is in the franchisors interest for you to succeed
6) Accounting procedures and business systems are well established
7) You are part of a group of people all running the same business
8) You benefit from national marketing

The disadvantages are:

1) You have to pay the franchisor a percentage of your profits
2) You have to follow the guidelines laid down by the franchisor
3) The Franchisor controls the development of your business
4) The Franchisor dictates your supply chain
5) You have to market the business in a way that is approved by the Franchisor
6) You have to report back to the Franchisor at least annually

Before you jump in

Before you commit to a franchise opportunity make sure that you evaluate the following points:

1) Take professional advice from lawyer before signing any agreements
2) Take advice from an accountant to check the viability of the business
3) Carry out market research to see if the franchise is right for your area
4) Be prepared for hard work - running a business requires commitment

If you’re ready to make the commitment, franchising can be a rewarding, and often highly lucrative business.