Are you thinking about opening a franchise and you want to understand if it is a convenient option? An analysis of the Pros and Cons of it is what you need!
Are you thinking about opening a franchise, but do not know the risks and the real potential? What are the pros and cons related to a similar business experience? Let’s find out right away with analyzing in detail the characteristics of the so-called franchise.
Before explain exactly all the advantages and disadvantages of franchise business, it should be pointed out that this form of cooperation, generally based on an agreement between the franchisor (manufacturer or distributor) and the franchisee (usually independent reseller), grants…
- The franchisee the opportunity to market the products of the parent-services, using its brand and benefiting from its technical support or advice on working methods, in exchange for paying a percentage of sales and / or an initial charge;
- Franchisor the opportunity to expand their business and expand by opening more stores in fact managed by the new members.
Without this short preamble, let’s therefore the actual advantages and disadvantages arising from opening a business in affiliate : why opt in favor of such a choice, such as security guarantees and, above all, what kind of risks are involved in the short and longer stretch!
- Good reputation
If you sharpen a business known and appreciated by consumers, are you sure not to have to spend in the first person to build a good business reputation, because that brand to which you associate is already sufficiently known.
- Assistance, training, and simplified management
To open a franchise allows you to get into a perfectly balanced business structure and functioning, in which, in addition to receiving free assistance and continuing education on the part of the parent, you can also make use of a management system and the control Simplified activities.
- Organizational and advertising costs reduced
The affiliation to a solid company puts the independent dealer in a position to avoid a prior certain expenses related to advertising or the purchase of furniture, computer, etc .: a series of significant costs, usually imposed on anyone wants to start from scratch a commercial reality.
- Risk content
Choose to open the new store a reality already tested by other entrepreneurs, will let you know in advance the difficulties to be faced along the way and avoid certain risks are able to create you more or less considerable problems.
- More opportunities to access credit
Those who decide to open a business in affiliate has greater possibilities, as well as to forge beneficial agreements with banking and financial institutions, also to obtain the necessary funds to realize the entire maneuver.
You may also like to read another article on Tradenligne: Open a company: 5 financial tips for companies in the start up phase
Disadvantages of franchising
- Lack of independence
Any franchise business requires the franchisee to the specific rules to be followed with the utmost rigor, which do not allow him to manage his own reality independently despite the degree of independence resulting from contractual agreements, the parent company imposes always specific constraints to which subject.
- Low level of reactivity
Even if the market requires flexibility and susceptibility to change, before the franchisee can adjust its strategy to embrace new management policies, should expect the franchisor’s approval, accepting the time required for the processing of his business.
- Strong standardization
standardized systems such as those of the franchise, on the one hand simplify the entrepreneur’s activities, but on the other prevent him to experiment with innovative ideas and taking any kind of initiative (launch of campaigns, promotions, discounts, etc.).
Following are the main pros and cons of opening a franchise : important factors to be weighed very carefully before jumping headlong into a project which, although less risky than many others, however, presents considerable constraints.