Advantages and Disadvantages of Franchising

Franchising can have a number of benefits including owning your own business instead of working for someone else and it makes it easier when selling a business. With benefits always come a few downsides. It is important for you to understand these advantages and disadvantages to determine what is best for you in business. The following information is meant to help you decide if franchising is the way to go.

Advantages of Franchising:

  • Provides an already usable business model

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  • Training and support provided

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  • Financing can be easier to get

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  • Trade name consumers and potential consumers recognise

These four advantages allow you to use a proven business model, not only to further your business but also to get the financing you need. A bank will still look at your research regarding the franchise and the proposed area; however, they are more likely to provide financing for a franchise than a business without a proven business plan. Franchise companies provide at least 3 months of training and support to help you get set up. Consumers will also recognise your business name, which makes them more inclined to visit your store than something they have never heard of.

Disadvantages of Franchises:

  • Restrictions for Activity

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  • Restrictions on types of Sales

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  • Not wholly independent

These disadvantages can be the deciding factor. As a rule many of us tend to focus on the negative aspects of an item, opportunity, etc. It is important to know the restrictions, but remember the advantages when you make your decision. You may not be able to change the business model, even if something is not working the best for you, but on the other hand you are running a business. There are restrictions on activities and sales you can do. For example, you cannot decide to have a sale if it is not sanctioned by the original company. To a degree you will have to adhere to the franchise model. You will not have the complete independence you get with your own business plan.

Despite this lack of independence it will feel safer to be a part of a business model that works. Other franchises have been a success in the one you have chosen, or you wouldn't have decided to invest in that franchise. As long as you do your research and consider the royalties or upfront payments, you should be able to run a successful franchise even with a few downsides.