Starting a Business – To Franchise or Not
So, you have saved enough capital to start a business. The only problem is you do not have any idea on what business you wish to enter. No, scratch that. The truth is you have too many ideas that you can’t seem to determine which business to go for. One minute, you wish to have your grill and presto bar. The other minute, you suddenly wish to have an up-and-coming trendy bar. With all these ideas in your head, you are flabbergasted as to which to go for. To spare you from all the thinking, you decided to go for franchising. You think this is the safest and most effective way to invest your hard-earned money. Since franchising a business covers all the basic business aspects, there is really nothing left for you to do. In addition, most people trust that the business operations, strategies and techniques that a franchise will provide them are all effective and useful. Therefore, there is really nothing to worry or think about. Is there?
Well, franchising a business may give you many benefits however there are also downsides to it. If franchising a business ensures that you will have a successful business then all business franchises should be rich by now, shouldn’t they? Are you torn between franchising a business and starting a business from scratch? Let me enlighten your mind by giving you the real deal about franchising a business.
Let us start with the good news first.
Pros of a Franchise Business?
- There is no need for feasibility studies or any business plans. You receive all business plans. You do not have to start from scratch. You can say goodbye to planning, advertising, strategies and many more, because it is inclusive of the franchising package. Honestly, the convenience of franchising a business is one of the many reasons why small business owners like it.
- Big profits. Franchise businesses are USUALLY already profitable businesses. According to some studies, franchising a business ensures that you have 90% of having a successful business while establishing a business will give you 90% chance of failure. Franchising a business eliminates the trial and error phase.
- Popularity. Franchise business is available for franchise for a reason. Most of these businesses are already well known. This is why many people are already aware of your product way before you open your store. Instead of looking for target market, the target market will be the one looking for you.
- Achievement. It is indeed self-fulfilling if you manage to have your very own popular fast food chain.
Cons of a Franchise Business?
- Big Franchising Fee. Since the franchise will be providing you with just about everything you need, this comes with a price. Business franchise has franchising fees. Apart from the initial franchise fee, you would also have to shell out money for advertising fees, employment trainings and many more.
- Restrictions. Since the franchise company is in control of everything, they are the only one who has the right to change the rules and regulations of the business. They will be the one to say when to change the recipe, trade name and many more. There is a franchise agreement that you have to sign prior to franchising.
- Franchisor’s bankruptcy is yours too. Once the company goes down, you will come with it too. This is why it is best to choose a reputable and strong company when thinking of franchising a business.
With these pros and cons, is it better to franchise or not? The decision is all up to you!
About the Author:
Joyce is a finance and business blogger based in the Philippines. She is currently working for Australian Grants Gov Portal, a website about Australian government funding, funding and loans, Australian grants or community group.