The franchise is that form of business in which an individual can use the business model and brand name of a well-established company for a fixed time period by paying upfront payment and fees so as to use the company name and goodwill. In order to understand about franchise in a better way let’s look at some of the advantages and disadvantages of franchise –
Advantages of Franchise
- The first and foremost advantage of franchise is that since the brand is well established, one does not have to incur any expense related to marketing and publicity of the product and we all know that in today’s business environment marketing cost comprises substantial chunk of expenses for any business and if one does not have to incur marketing cost then it certainly is an advantageous position.
- Another benefit is that it is the company which provides training and all types of support to the owner which in turn makes it easier for any individual to do business as he or she is getting know-how and technical support from the best in the industry and in long run if one wants to start his or her own business then also this experience at the franchise business can be of great use
- As far as the company is concerned it also benefits the company because by giving franchise at far-flung areas which cannot be penetrated by the company if it wants to go through direct sales route. Hence due to franchise company is increasing not only its product reach but also getting fees from the people who are taking the franchise of the company.
Disadvantages of Franchise
- The biggest disadvantage of franchise is that one is doing all the hard work not for himself or herself but for the company as profit margin is fixed for the franchise owner which is not the case when one has his or her own business where profit margins are great and one does not have to pay anything to anyone and all rewards from hard work of the individual belongs to him or her only.
- Another limitation in franchise is that parent company has strict guidelines and rules with respect to everything like products which can be offered to customers, price of the product, marketing of the product and so on and if the franchise owner does not follow those rules or guidelines then it can result in cancellation of the franchise and other monetary penalty and hence the owner is under constant stress about these rules and guidelines from the company giving the franchise.
- Another limitation is that upfront fee and recurring expenses are hefty if one is taking a franchise of established companies and hence one has to take into account all these expenses also into account while doing cost-benefit analysis of this business and another factor is that if due to some unforeseen reason company’s brand image takes a hit then sales of your business will also go down without your fault.
Conclusion about Franchise
As one can see from the above that franchise business has both benefits as well as limitations and any person thinking of taking franchise should carefully look at above points and then decide whether it is profitable to venture into franchise business or not.