Starting a business requires you to invest a lot of time and money, and not all businesses succeed. While a startup can give you full freedom over all the decisions regarding your business, there is a lot of uncertainty involved. You have to develop the brand. Also, you will have to develop a customer base which might take years to make. It may take a lot of trial and error to get the supply chain setup.
Starting a franchise is another way to start your business. In franchising, the franchisor grants the franchisee the right to use its name and also sell its products or services, which are exclusive to them. There is also the benefit of having a solid customer base.
There are two ways in which you can own a franchise. You can either buy an existing franchise unit or you can start a new franchise unit.
Franchising is an excellent option for most people who don’t have experience or are trying to get experience in a different business model. The franchisor helps you immensely, be it by helping you find a suitable location for your franchise or acquiring the equipment for your franchise.
Owning a franchise has its pros and cons.
The Pros of buying a franchise
The pro of getting a franchise is that the franchisors help you set up the franchise from the ground up. You do not need to have the initial experience to start a franchise. You get to employ the process and methods of a successful business. You get trained to manage the business and you also get training to use the software and hardware. You are also benefiting from the staff selection and training process. You are more likely to get loans from banks and other financial institutions as they may already know about the franchise model. You are likely to get the territory’s exclusive rights for your franchise. You are free to run the franchise as you want to, but you must have to follow the rules set by the franchisor. Your business does not have to undergo trial and error and do extensive research to perfect the products or services you offer.
The cons of buying a franchise
The cons include your daily operations are controlled by the quality and standard set by the franchisor.
You are only allowed to buy the raw materials from the suppliers chosen by the franchisor. And often the materials cost is higher than the market value when purchased from these suppliers.
You may not sell products or services that the franchisor hasn’t approved.
You are paying a part of your sales to the franchisor as royalty.
You may have to pay a monthly advertisement expense to the franchisor.
You can’t end or close down the business without talking with your franchisor. It is usually a lengthy process.
Who Owns What?
What you own:
You get the profits that come from the business operations after deducting the royalty.
You own the physical store if the store is not rented.
You own the licence which may include the usage of the trademark, software, process, the slogan of the brand.
What does the franchisor own:
The franchisor owns the brand, the software and all the processes and methods that they licence to the franchisees.
The franchisor owns the trademark, slogans and other brand indicators
Starting a franchise is, in most cases, a safe bet. The business is less likely to fail and reap the benefit of being a part of a successful brand chain.