Franchise - Advantages & Disadvantages
Franchises are hot items these days. There are literally hundreds of franchise
opportunities in Australia covering all areas. However, before you decide to
spend all of your savings on the franchise of your dreams, you may want to consider
what the pros and cons of buying a franchise versus starting your business from
scratch. As with anything, there are things you gain and things you lose. Let's
take a look.
The ADVANTAGES of buying a franchise include the following:
- Be your own boss (at least to a point) as appose to working for
an employer. Franchises offer you the chance to go into business
yourself even if you are lacking in capital or business experience.
- Get a head start. Compared to normal start-up companies,
franchises provide a head start to the business owner by providing support
on an as-needed basis. A common saying in the franchise industry is "You're
in business for yourself, but not by yourself."
- Gain additional training and assistance. Franchises have
a vested interest in your Success. As a result, many offer extended training
and assistance with business set-up, personnel training, site selection, lease
negotiation, collective buying power, and advertising.
- Profit from name recognition. One of the most difficult
things to do when starting a business is to develop a recognisable presence
with your customers. This usually only happens over time. Franchises eliminate
this hurdle by developing an image in the marketplace. This is important because
it saves you both time and money. However, be certain that the image is a
favorable one before you invest.
Although there are definite advantages to franchises, like everything else,
there are also disadvantages. Some of the CONS of buying a franchise include
the following:
- You must play by the rules. If you are buying a franchise
because you can't stand working for someone else, you may want to think twice.
When you buy a franchise, you are not free to do as you please. In many cases,
franchisors require you to play by their rules. These rules may pertain to
such things as the products you are allowed or must carry, reporting procedures,
dress codes, hours, and, overall, how you run your business.
- Nothing is ever free. In addition to the initial franchise
fee you will have to pay, most franchisors require that you pay a percentage
of your monthly gross sales back to the parent company. Many also require
that you buy your products directly from the parent company (which may prohibit
you from getting the best prices).
- There are no right or wrong choices. Its all about weighing
up your options and choosing the one you feel most comfortable with. For some
people, giving up just a little control is completely out of the question.
Others may like the fact that someone will be lending a helping hand (even
if it does cost a little).
What to consider when buying a franchise
Some of the things you will want to consider before buying a franchise
include the following:
- Enjoy yourself. Pick something you are going to enjoy doing
years down the road. It's easy to get mislead by promises of high profits
and outstanding growth, but in the end, if you don't like it, chances are
you won't stick with it.
- Check out the competition. Research is critical whether
you are starting your own business or buying one. Find out who your competition
is. Are they busy? Is the market already saturated with this type of business?
Asking questions like these can often save you from making a costly mistake.
- Buyer beware. Remember, franchisors want to sell you a
business. Even though many franchisors will present you with their profit
projections, it is best to come up with your own figures.
- Find out about financing. Over 250 franchisors offer some
type of financing. Find out if the one you're interested in does.
- Evaluate the overall strength of the franchisor. Make certain
you are given a all the rules and regulations of that franchise
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