Advantages and disadvantages of owning a franchise

Benefits

There are a number of benefits of buying a franchise. Not only because they are popular among small business owners but it's great for people looking to get out of the every day grind and competiveness of corporations. It is also a great idea for those wanting to break into an industry, such as a fast food restaurant business.

Franchises offer proven business model

Most franchises have already found a proven strategy and business plan. Everything is basically mapped out for you step by step for the most part.

Name recognition, Marketing systems and Support

Franchises already have a known product and generally products consumers buy and buy often. Everyone knows, and most people love Dunkin Donuts so you already have consumers ready willing and able to buy your donuts if you go into a Dunkin Donuts franchise product because they already know what it is and have tried it.

Franchises also already have proven marketing systems. You will reap the benefits of their marketing system though the media in both print and television ads. If you owned your own business, it would be difficult to compete with company that can buy a 30 second spot on television to advertise their product.

Most franchises offer thorough sales training and support. You are helped with the trainers you will adopt your life learned sales skill to that of the franchise. It is to the franchise's advantage to provide training and support as it improves sales in products and franchises.

Disadvantages of buying a franchise

Buying a franchise is expensive. According to a 1996 study by the International Franchise Association, 20 percent of franchises had up-front costs of more than $250,000 and 54 percent required initial investments of more than $100,000. Franchises also demand ongoing royalties monthly usually between 5-8 percent of your sales.

Franchises may require you to follow their operational style to the letter. The successful franchise already know their formula is working and is profitable and expect their franchisee's to do the same. It may cut into your independence and creativity and will probably give you the feeling you are actually paying someone to work for them.

Whenever you look into any business, you will always need to look out for exaggeration. Anybody who wants to sell something can exaggerate or even lie to get you hooked. Some common unethical practices include:

• Franchising as a pyramid scheme. Some franchises will try to make money by collecting franchise fees, which can be excessive and won't spend the time or money to help you or their existing franchise succeed in the long run.
• Overcharging for supplies. Some franchises will insist you buy supplies either from them or from their supplier and will inflate the prices.
• Charge fees for unnecessary training. Some franchises will charge you for so-called mandated training when it is not necessary. Most true franchises usually will not charge you for training and support or charge a nominal fee.