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Franchise Advantages and Disadvantages

Advantages of franchise ownership
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You could start a business of your own without involving anyone else but the risks are always greater when running a start-up. A staggering 50% of new businesses fail in the first year, which shows how incredibly difficult it can be to launch a new business in such a competitive market. What makes your brand unique to the millions of others already out there? What kind of team do you have behind you? Do you know your target audience well enough? There is a huge amount of time, energy and investment needed to get a business off the ground and even the hardest working person cannot always guarantee success.
It is worth noting that only 1% of franchise businesses fail each year. This explains why more and more people choose to be their own boss within the comfort zone of an effective business model, such as a franchise, and the statistics are there to back up such a decision.

In franchising, this risk of failure is greatly reduced. Someone has already done the work establishing the business, has ironed out the wrinkles, and has gained the experience needed. The franchisor is prepared to share their expertise with franchisees and provide them with tools, in return for a financial consideration. Basically, a franchise is a conveyor belt to faster, cheaper business ownership and success.

Starting a new franchise business can be daunting but comprehensive planning can make the process more enjoyable and successful in the long run.

The first step is to decide what kind of business would be the most suitable. The rise of the internet means there has been a growth in online companies so that could be a possibility, especially for a specialised retailer. Other options could include looking at a franchise operation or setting up a business in a field that is already familiar.

Once the type of business is decided on, the next step involves conducting market research. Finding out about possible competitors in the area can help prevent possible financial problems as well as allowing you to ensure you charge a realistic price or fee for goods and services. Research can also test the viability of a business start-up idea, for instance there may be little demand for a pet-sitting business if there already a high number of successful companies in the area offering the same service.

Advantages of Franchise Ownership
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A business plan can also be a helpful way of ensuring that you have a realistic idea of how the company is going to progress as well as identifying any possible marketing opportunities. More importantly it can also ensure that a business stays on track as often the day-to-day running of a business can distract from the original long-term plans. The plan is also a useful document when it comes to approaching possible investors or presenting to banks when applying for start-up capital.

Finance is a crucial barrier for many new small businesses, especially if they are facing direct competition from well established and larger firms. However, there are a growing number of options for start-up firms and getting a clear picture of potential finance problems at the initial stages can help ensure capital is still available if sales are not inline with original forecasts.

It is also important to ensure that all the appropriate institutions are informed when you finally decide to launch a business, including HM Revenue & Customs and that adequate insurance cover is arranged, especially if you employ other workers.

Working for yourself and starting your own franchise business can be highly rewarding but can also be very challenging. Anyone with the correct approach, as well as a strong level of commitment, is likely to enjoy a number of benefits of being their own boss.

Although, like anything else in life, there are pros and cons involved, the benefits of franchising outweigh the disadvantages. Obviously no business alliance should be entered into without diligent evaluation, but the typical franchise system has many advantages that suit ambitious individuals nicely.

Advantages of Franchise Ownership
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Advantages of Buying a Franchise

  • The business has already been proven to work, and the network of busily trading franchisees is testimony to that. The franchise has been in action long enough to demonstrate consistently successful results, which should be fully documented.
  • Franchisees are given full initial and ongoing training, which helps them to set up, develop and run the business to the best of their ability. Sometimes their business partner and/or key staff receive training too.
  • Working with an established brand can generate instant customers who have used it before. Getting a loan from a bank can also be easier when you are part of a well-known brand.
  • The franchisee is their own boss. Now they can escape the frustration and politics of answering to someone else, and benefit directly from the hard work they put into a business. Plus they have greater control over how they live their now flexible life. For example, it is possible for a franchisee to work from home and spend more time with their family.
  • The franchisor helps to find a good location that will deliver traffic if that’s what is needed (e.g. for retail or food outlets) or that will be cost-efficient if visibility is not paramount (e.g. for cleaning or home improvement businesses).
  • Marketing tools and ad campaigns are provided both nationally for the brand and locally for individual branches. The majority of franchisors also help franchisees make major local impact with a publicised launch of the business.
  • Franchisees receive ongoing support, delivered via phone, a company intranet, newsletters, regular visits, regional meetings, annual conventions and more. They can rest assured that they are not alone. The franchisor wants the franchisee to succeed and will therefore provide the necessary support and advice to make this happen. Some franchisors even employ a Franchisee Manager to assist franchisees with any day-to-day queries that may arise.
  • Centralised purchasing is a feature of many franchises where the franchisee benefits from discounted pricing on supplies such as goods for a retail store or ingredients for a restaurant. This is because the items are being bought en masse.
  • With close to 1,000 franchise systems active in the UK, there are many different types of franchise opportunities available, ranging from micro businesses and low-cost investments to something more substantial. For franchisees not ready to leave their day jobs, there are plenty of offerings that require only a part-time commitment that could grow into full-time gradually. Ambitious entrepreneurs, who want to totally commit themselves to owning a business, have a vast range of choices.
  • For many franchisees, running a profitable business brings pride and a sense of achievement. It is a chance to prove to themselves and their communities that they can be successful.

Disadvantages of Buying a Franchise

  • The franchise agreement is generally set up to benefit a franchisor. This is a legally-binding agreement. Once a franchisee has signed it, they are legally obliged to uphold its terms.
  • Running a franchise means that you have less flexibility in how the business is run. Franchisors often have restrictions on how their product or service is run, opening hours or which suppliers are used.
  • The franchisor dictates how much is spent on costs such as advertising or technology so there is little room for negotiation here.
  • The reputation of a franchisee’s business depends on the brand’s reputation overall. If one franchise performs poorly, this can affect other franchises across the country.
  • It is up to the franchisor to determine whether your franchise agreement is renewed. Common requirements for renewal include paying renewal fees on time, letting the franchisor know of your desire to extend in good time and doing everything expected of you in the franchise agreement.

The franchise industry has proven to give entrepreneurs a better chance of success than starting up a business alone. No franchise industry sector can guarantee success – hard work is needed to help your business succeed. Buying a franchise is a big step and one that should not be undertaken lightly. Do your research about the franchise you are interested in, get as much information and guidance as you can before committing to a franchise agreement. If you’re interested in being your own boss, with the support of a proven business model, a franchise opportunity would definitely be something to consider.

Take a look at our wide range of franchises right here to see how you can be your own boss and run a thriving business today!

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