What You Need to Know About Franchising

Knowing the pros and cons of franchising will help you decide whether to get that franchise that you have been thinking of or to find other alternatives.

Franchising is a licensing contract between a franchisor and the franchisee. A franchisor is a person or a company who grants the license to use a business name and format, while the franchisee is the one who pays for the license.

Before making this kind of business investment, you need to think through all its aspects. This way, you can maximize the opportunities and you can also prepare for possible problems down the road. Here are all the things you need to consider:

Pros

You don’t need to have experience in the business.

The franchisor will provide you with all the training and support that you will need in operating the business. They will take care of everything, including the equipment that you will use, the products, and even the uniform of your crew.

You can use the name of a known brand.

Customers already recognize a franchisor's brand. And because it is already established, you no longer have to struggle in introducing your products to customers.

You can take advantage of exclusive territory rights.

Franchising agreements usually include exclusive territory rights. This means that the franchisor will only grant the license to one franchisee within a specific area. This eliminates the probability of competing with another franchise similar to yours.

Cons

You might pay higher costs.

Aside from the initial cost of paying for the franchise, some franchisors would require you to pay ongoing fees. The franchisor, in turn, provides continued support (training, advertising, etc.).

You are bound by an agreement.

The franchising agreement can create restrictions on innovations that you want to do for your business. To protect the brand that you franchised, a list of rules should be followed. However, it also means you can’t introduce new concepts that might appeal to your local market.

You are open to risks.

As one of the franchisees, you have no control over what other franchisees do to their business. If one franchisee does something that can damage the reputation of the business, then your business will also be affected.

Lastly, in choosing a business, franchise or not, it is always best to choose what you want to do. You need to be passionate or at least enthusiastic about it. Because, when you love what you do, that will be your ticket to success.


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