Business owners just starting out and
considering a franchise as the best way to invest their hard-earned dollars to
start a business often wonder what the advantages and disadvantages of
franchises businesses are.
Franchise businesses offer numerous advantages and a few
disadvantages it is important for a business owner to learn about before diving
into a franchise.
Advantage 1: Excellent Business Model
Pre-defined business models that are already proven to work
are one major advantage to a franchise business.
Multiple locations of one business, such as a franchise, exist because the company behind the franchise has carefully developed a business model that can be transferred to many different types of ownership and many different parts of the nation.
Advantage 2: Not Developing from Scratch
Perspective business owners who want to start a business
from scratch are often faced with the dilemma of exactly what to offer the
buying public that no other business is already offering, and do it in a way
that can be successful.
Franchises already do this. Prime examples are burger
restaurant franchises that are scattered all over the country. Franchise types
such as these offer the public something—food, experience, price, etc.—not
offered by even other franchises in the same category.
Business models like this are shown to be popular and
successful, making them a good investment for the start-up business person.
Advantage 3: Market Research is Done
Franchise businesses have typically already determined where their franchise locations will be successful. Years of market research and product development and studying demographics of particular towns and cities around the nation has already been done.
Perspective business owners who
aren’t market-research gurus would have to spend thousands and thousands of
dollars better spent on direct development of their business in order to
conduct the type of market research national franchises conduct to determine
where their model will work the best.
Imagine doing such research in to
the type of business you are considering, and spending thousands and thousands
of dollars on that research only to realize that the type of business you want
to open already has too many competitors in the marketplace or simply will not
work in the town where you wanted to open it.
Franchise businesses help
perspective business owners avoid this needless waste of time and resources.
Disadvantage to Franchise Ownership
Franchise ownership offers far
more advantages than disadvantages.
Lack of freedom of choice is the
major disadvantage to franchise ownership. Franchises have such a
tried-and-true business model that is proven to work time and again that they
do not let individual owners deviate too much from their own plan.
Franchises will, to some degree,
control everything from the color and shape of the building you are in to the
exact product offerings you may serve. Perspective business owners who are
inclined to be more individualistic and creative in their work may find that a
franchise model is more strict than they like. Strictness in the franchise
model, however, is a key to the model’s success.
Start-up capital is another
disadvantage to franchise ownership. Depending on what franchise you wish to
own, the capital can range from $10,000 (doable for most people) to $100,000.
Franchise ownership offers many
advantages and a few disadvantages.
Perspective business owners who
do their research in to the individual advantages and disadvantages of
franchise ownership will find the specific advantages and disadvantages to the models
they are considering.
About Author: Grace Bynes
Grace is a Business Analyst by profession with more than 7 years of experience of working with digital businesses mainly eCommerce and SaaS startups. Grace also loves to travel and explore the world!