pros and cons of franchise business model

Are you thinking of buying a franchise? Here are the pros and cons of this business model

The decision to become a franchise owner is important. It can be very rewarding, but also the opposite. The franchise model is powerful, but it is not perfect. That’s why I suggest you ignore some of these famous sayings: “Everything is ready, just follow the system”, “Franchisors give you all the support you need to succeed”, “Buying a franchise is less risky than starting your own business”.

Although it is very good, this model is not for everyone. If you’re really considering buying one this year, the pros should outweigh the cons. Remember, you are investing in someone else’s system, not your own.

Pros

Systems. There are some ready-to-use systems, such as those for computers, marketing, operation, among others. The business system of a franchise is the heart and soul of the business. Respect it and use it, that’s what you’re paying for.

Training. You will be given formal training when you sign the franchise agreement. This will sometimes be online and they will even make you learn things before you even begin formal training at the corporate.

Technology. Franchise budgets have gone up over the years. With this business you will benefit greatly from the technology that the franchisees have. Certain technology will be designed to help you deal with the customer or perhaps to fix things like accounting or payroll. If you want to know how good it is, ask the franchisees, they use it every day and they will tell you the truth.

Advertising/marketing. Franchisees have marketing and advertising plans ready for you. Having these at your disposal can help you grow. As a tip, make the most of your opening day. You should take advantage of everything the owner has to offer.

Marketing is an everyday thing. Today’s franchisees have access to businesses and tools that can help you get your business in the minds of consumers.

Support. Most franchises have support systems. From the ones that fix your phone to the ones that make sure your computers work properly. Franchises have systems that will help you if there is an immediate problem. Tip: don’t hesitate to let us know when you need support, that’s what you paid for.

Real estate resources. The importance of having a good place depends on both parties. In other words, both the franchisor and the franchisee must make sure they have the best option, because if one is doing well for the other one too, it is a win-win situation.

A network of franchises. There are franchise owners who have invested in an opportunity. They have experienced things and can help you with the problems that arise. In fact, the franchise network is so important that, if I were to make the operations manual, I would highlight the fact that there is a franchise network with the same mindset ready and willing to help you. Those are the ones with the answers. They are the ones who have gone through the problems you are starting to experience.

Against

Franchise fee. You are required to pay this fee from the beginning. This investment is like the cost of entry, which allows you to use the information legally. The franchise fee may vary according to the line of business, but you should still consider it a significant expense.

Royalties. As a franchisee, you will be paying the franchisor a percentage of your sales from time to time. The percentages will also vary, I have seen food stores that charge a 5 percent royalty and others, such as consulting firms, that charge 12 percent.

The rules. You must follow the franchisor’s instructions. Franchise systems need rules, they are there to keep things in order, why do you think Starbucks serves you the same way everywhere?

You shop. For most people, it’s necessary to buy supplies from their franchisees. If you are a Dairy Queen franchise, you must buy the ingredients directly from the corporate.

Advertising fund. In most cases, you will be paying a percentage of your sales (in addition to royalties) to the franchisor. Tip: Before you buy the business, find out what its marketing plan looks like so you can see how good it is. Ask existing franchisees to see if they are getting a return on their investment.

Sell your franchise. If you decide to do this, the franchisor must first approve the people to whom you offer the business. This may not matter much to you, but your franchisor does, believe me.

It is important to see both sides of the coin, especially with what could be a big investment for you.