One of the advantages of franchise is that it already has an established business model, which will greatly help you run the business. You can always ask for technical assistance, in terms of financing, market plans and site selection. Every franchise has management and product training, so they will prepare you before you start. They will also help you a lot with advertising.
There are also some disadvantages: you will not have full control over how the business is run. You will have to pay for things like advertising that may not be essential to you. It will also be required to have things on your inventory that may not suit your location, and if you have a terrific idea, you will not be able to try it, because of the strictly controlled business model.
You can opt for two main forms of franchising: product name franchising and business format franchising. The latter is more restrictive in terms of how you run the business, but the franchisor will also help you more.
Buying a franchise is not cheap. There is an initial franchise fee from a few thousand to tens of thousands of dollars that is sometimes nonrefundable. Buying or renting a proper location and furnishing it may be also more expensive than if you chose to be independent.
The costs associated with your inventory will also be higher than you would have if you were independent, and there may be a “grand opening” fee you must pay, in exchange of the promotion of your business.
And this is not all: you will also have to pay royalties based on your location’s gross income. Sometimes you will have to pay this even if you don’t have very much income, as this fee is for the right to use the franchisor’s name.
You will also have to pay for national advertising fees. Sometimes these are co-op arrangements, which mean your business is advertised in your area or in rotation with other locations. However, you probably will not be happy to find out that the advertising fee goes for advertising the brand or to attract new franchisees, not to advertising your business.
Franchise terms usually run between 15-20 years, and there is the risk you will not be able to renew the franchise agreement. If you fail to pay the required fees, or you can’t meet the standards of operation, the franchisor can cancel the agreement.
Daniel has been writing articles online for nearly 4 years now. Not only does he specialize in business related issues, you can also check out his latest websites on Wooden Filing Cabinet and Unfinished Wood Furniture.
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