Buying a franchise can offer the business owner advantages over starting a business on his own. The new owner receives training and an operating structure. If the name of the franchise is well-known, this will provide a customer pool when the franchise opens. Purchasing a franchise also comes with disadvantages. The prospective franchise purchaser should consider these disadvantages before investing.
Framework
Most franchisors require strict adherence to a business framework to ensure uniformity among franchise locations. A franchise owner is required to work within the business structure set up by the franchiser. This may include the choice of vendors that supply goods and services, store layout, marketing, employee policies and products. These restrictions may not be good for every owner in every situation. Also, some business owners function better than others while operating under strict guidelines.
Name Recognition
Name recognition is one of the best features about buying a franchise. Because of the strict adherence to the parent company's rules, the customer knows what to expect. However, if something bad happens at one of the franchises, everyone with that franchise suffers from the negative publicity. This could reduce the number of customers.
Expense
One of the biggest drawbacks of buying a franchise is expense. The initial cost may be high and often the owner must pay royalties to the parent company. Some companies get a percentage of each month's gross profit. The cost of the franchise license is in addition to all the equipment, supplies, rent and other expenses of any business. The strict framework the franchise imposes to ensure uniformity can also add to the expense.
Growth
When a franchise owner reaches the maximum of her store's potential, it's hard to expand. Franchises control the number of their stores in a specified area. These restrictions prevent the franchise from overbuilding in a specific area. This policy makes it difficult for a successful owner to expand and open more stores.
Selling a Franchise
When a franchise owner decides to sell, he may have to get approval from the parent company. Most companies have a rigid set of rules and procedures to follow when the franchise owner sells. If the contract is long term, the franchiser may be obligated to pay penalties to be able to sell the franchise. In addition, the parent company may get a percentage of the sale profits.
Tags: franchise owner, parent company, business owner, ensure uniformity, strict adherence