Franchising
Franchising is a popular way to start a business. From a business perspective, franchising is a strategy to increase business and capture a greater share of the market. You are not buying a business, however, but establishing a business by paying to use the license, and therefore the rights to sell a brand name product that belongs to someone else (the franchisor). With this action you (the franchisee) then becomes one of many licensees working together to increase the market share for a particular product and out-compete the competition.Buying Into a Franchise
Typically, someone looking to buy into a franchise needs a certain amount of money upfront—just how much depends on the type of business. There is also a training period in which the franchisee learns the ins and outs of running the franchise, such as inventory control, distribution systems, customer service, and operating procedures. Next, the franchisee will be assigned a location. In addition to a fee that is paid upfront to the franchisor, monthly fees are also paid by the franchisee to the franchisor.
Advantages of Franchising
Someone who enters into a franchise becomes part of an existing group of businesses with an established and usually well known brand name. This means that you as a business owner already have a foot in the door when it comes to capturing a share of the market. Franchising is generally the fastest way to start a business, and to make money. Because you are part of a larger group, there is already an existing marketing strategy, operating procedures, and distribution system in place to sell the product. In other words, it is not necessary to build the business from scratch. Because of this, there is also less risk involved.
Disadvantages of Franchising
One of the caveats of franchising is that you must adhere to the rules and regulations of the franchiser from whom you paid for the privilege of using the brand name and accompanying system of operation. As such, you do not have the freedom to conduct business differently. This aspect of franchising can be problematic for some people. If you believe you can be more successful at building and running a business than at buying into someone else’s system, franchising may not be the right choice for you.
Related Links: |
|
