Answering the Question: Why buy a franchise?
Why Buy a Franchise? Is the question being asked by people who are having second thoughts in franchising a certain product.
Before going on the crux of this article, let us first find out the meaning of the term “Franchising”. The term basically refers to a system of arrangement in which two parties are involved. The franchisee will pay the royalty from the seller (franchisor) in order to sell a certain product or service. The inherent right to trade the product or service is called “franchise”.
There are two types of franchising business opportunity: one is business format franchises and the other one is product & trade-name franchises. The former involves distribution of the product through the so-called “dealers”. The latter on the other hand generally include the necessary things to start the business in 1 complete package.
To fully answer the question Why Buy a Franchise? Here are the different advantages as well as disadvantages of any franchising business opportunity:
The advantages of franchising business opportunity:
- Name recognition – a popular brand name would attract many customers and has competitive advantage over the others.
- Proper Training – the owner of the business can provide training program that will teach the future franchisees how to properly operate the business.
- Reliable Support – the distributor can extend managerial support and some tips in decision making to the new franchisee.
- Effective Advertising Scheme – the cooperative form of advertising may provide nationwide exposure at a very reasonable price.
- Get Help in Financing - the distributor generally assist the franchisees in the process of obtaining financing for the business franchise. In most cases, the franchisor or distributor is the source of financing. This scheme is less risky as compared to other means of establishing a business.
The disadvantages of franchising business opportunity:
- Sometimes high franchising fees- the franchising fees must be paid first before starting. The fees can range from few hundred dollars to thousands of dollars depending on the product or service.
- The royalties – there are franchises that requires a monthly-basis royalty. Most of the time, it is a certain percentage from the total income of the franchisee.
- The required quantity of purchases – the distributor may oblige the new franchisee to buy several materials for some reasons.
For sure the question Why Buy a Franchise? Has already been answered by this article. Decide now and get a business that will suit to your interest!
