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Advantages and Disadvantages of Franchising

There are different ways to realize your dreams in business ownership, and they include: investing in a proven franchise opportunity, buying an existing business or creating a business from the ground up. There are definite advantages and disadvantages to owning a franchise business over these other career or business ownership options but to know which path is right for you, you should first look at your motivations and qualifications for business ownership.

Let's consider a typical scenario:

You've been thinking about owning your own business for years and something recently has finally put you in a situation to do it. Maybe you have been downsized, laid off, or are just done making money for someone else and ready to make money for yourself. You are keen to take charge of your life, become your own boss and learn some new skills along the way. You want a good income and are willing to put in whatever hours necessary to jump start the new career, but your overall goal is to eventually work reasonable hours and have more time for yourself and your family.

If your story is similar, you are probably an excellent candidate for franchise ownership. This path will allow you to benefit from a proven system of operations, and a training program that will get you up and running quickly and efficiently. As you have no previous business ownership experience, the ongoing support you will receive from a franchisor will be vital to your success. Many franchise opportunities offer a turnkey package that will include almost everything you need to start your business. In addition, most franchisors require no previous experience in their industry so you can be open to a variety of types of businesses and won't need to stick to the one industry you know.

Franchisees can take advantage of lower cost materials due to group buying power. They also learn from each other and usually form a peer support system. Because you won't be occupied with every minute detail of owning a business as you begin down the path of franchising, you will be able to concentrate on growing your business.

One potential disadvantage to franchise ownership is that you must follow a franchisor's rules. In other words, you are in charge as long as you follow and adhere to the elements of the franchise system. This is necessary so that the franchisor can offer consistency across the brand - and let's face it, they've done the research and tested the procedures so their way is the right way. This is also a benefit to the consumer who can expect comparable quality products or services no matter which franchisee he patronizes, anywhere across the country or around the world.

The other perceived disadvantage is that a franchisee must remit royalties and sometimes a marketing or advertising fund fee to the franchisor. Royalty payments are compensation for everything the franchisor provides, including access to the brand, the operating system and related items. The franchisor uses the marketing fee to provide national advertising to build the brand and drive market penetration at a greater level than a franchisee could do himself. National marketing funds also enable franchisees to benefit from professionally produced marketing materials and realize efficiencies from commingled funds.

Franchising is a Different/Better Way

For a majority of people, franchising has proven to be a viable way to become a business owner. For the most part it offers the lowest risks and the highest level of support. Because a franchisor doesn't succeed until the franchisees do, you'll find a team of dedicated professionals willing and able to help you every step of the way, from site selection to employee hiring to grand opening. They will keep in touch with you from the very beginning to years down the road and have web sites, toll free numbers and dedicated staff to make sure all your questions are answered quickly.

The cost of this continued support is usually in the form of royalty payments based on earnings but successful franchisees understand that the benefits are worth the expense. Research and development is possible because of feedback from those in the field and this cooperative involvement is a hallmark of a well-run franchise business.

And that's why franchising succeeds - because it works, for the franchisor, for the franchisee and for the consumer.


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