Why Buy a Franchised Business
To be your own boss, you can start from scratch, buy an existing business or buy a franchise. People are attracted to franchises because they have proven to be extremely successful over the years, and they combine many of the benefits of business ownership with the brand name, experience, and economies of scale provided by the established corporate franchisor. In fact, good franchises generally have a higher success rate than other types of businesses.
Advantages of Franchising:
- Risk minimized: A reputable franchise is a proven business method, yet provides franchisees with a certain level of independence where they can operate their business. A very high percentage of franchises are still in business after 10 years.
- Name recognition: A well known franchise provides an established product or service which may already enjoy widespread brand-name recognition. This gives the franchisee a competitive advantage of a pre-sold customer base which would ordinarily take years to establish.
- Training: A franchisor can provide a regimented training program to teach the franchisee about the business operation and industry even if the franchisee has no prior experience. This is usually covered in the franchise fee and often includes training at headquarters and at your site.
- Support: A franchisor can provide managerial support and problem-solving capabilities for its franchisees. Pre-opening and ongoing support are signatures of a franchise. This makes starting a business possible for first time investors.
- Economies of scale: Cost savings on inventory items, insurance and equipment can be passed on to the franchisee from bulk purchase orders made by the franchisor.
- Advertising: Cooperative advertising programs can provide national exposure at an affordable price. Many franchises provide templates for websites, online and print advertising, or prefab radio and TV advertising.
- Financing: A franchisor will generally assist the franchisee in obtaining financing for the franchise. Lenders are more inclined to provide financing to franchises because they are less risky than businesses started from scratch. With good credit and collateral, you can normally borrow up to 80% of your purchase.
- Site selection: Most franchises will assist the franchisee in selecting and constructing a site for the new franchise location.
- Startup package: Many franchises provide complete operating manuals, software packages, policies and procedures proven in the field to be successful, so you can focus on the growth of your business. This is often covered by the initial franchise fee.
- Discounts: Some franchises offer a discounted franchise fee for military or minority owners.
Limitations of Franchising:
- Mandated Franchise Agreement: The franchisee is not completely independent as they are required to operate their businesses according to the procedures and restrictions set forth by the franchisor in the franchisee agreement.
- Restrictions: A franchise system may impose restrictions on the products or services which can be offered, the appearance of the business, advertising, and the geographic territory in which the franchisee can operate.
- Royalties: In addition to the initial franchise fee, franchisees must pay ongoing royalties and advertising fees.
- Limited Term: The duration of a franchise agreement is usually limited but renewable for a franchisee in good standing.
- Co -Dependence: Franchisees must be careful to balance restrictions and support provided by the franchisor with their own ability to manage their business. A damaged, system-wide image can result if other franchisees are performing poorly.
Despite limitations with franchising, most franchisees enjoy a good living with their business. In fact, a new franchise is opened every 8 minutes of every business day, underscoring the attraction of owning a franchise.
If you are considering starting your own business, you should take a serious look at buying a franchise to increase your probability of success. Affordable Business Concepts is here to help you find the right franchised business to match your goals.