Trying to figure out whether or not franchising is for you? Well, you’re in the right place.
In premise, franchising is a strategy that ensures the regular market spread of a brand via the medium of business opportunity for enthusiastic entrepreneurs. And as well as it sounds, there are some cons, as well as great pros that one must be aware of.
In this article, we will cover what is franchising, and why franchise in the first place.
So keep reading to learn more.
What Is Franchising? What Are the Pros And Cons of Franchising?
Franchising is a business methodology that allows a brand to expand its market presence, as well as get and keep customers. It’s practically a marketing system for creating the brand in the minds of current and future clients. As well as the method for distributing the services to a wider network of customers’ needs.
The franchise is a community of interdependent relationships that allow members to share:
- A proven marketing/distribution system
- A successful approach to doing business
- Brand identity
In premise, franchising is a business alliance between members who have interdependent responsibilities with a goal of market domination, thus leading to more customers than their competitors.
There are so many misconceptions about franchising, but the most common is “buying the franchise”. That’s not really the case. You are investing personal assets into a system to make use of a brand name, operating services, and progressive support.
Therefore, the relationship is a joint one, meaning you are legally bound to get and keep the customers using the provided operating and marketing systems of the franchisor.
In order to be successful, one must understand the legal and business ramifications of the relationship. Thus, your focus must be on working with brand managers and franchisees to continue to market and fully make use of the system.
The Advantages of Franchising
Alright, let’s start with the pros of the franchise opportunity. To keep it concise, we’ve opted to provide four of each, which are the most prevalent within the franchising community.
- Instant Brand Recognition
With franchising, instead of creating your own brand, the brand and its subsequent reputation are on lease for you. This means that people get to know what you are, and what you bring instantly.
Most people who franchise often find more value in the name than the services provided. You can get many burgers around the world, but people become loyal to their favorites, such as Burger King, Wendy’s, McDonald’s.
- Advertising Taken Care Of
Franchises can choose to market their own locations, but the parent company often takes care of this for them. This might include radio/tv advertising, window clings, social media efforts.
The goal is to welcome the general public into becoming acquainted with the brand and then begin to shop locally with the franchise.
- Vendor Relationships
Franchise owners are provided access to great vendor relationships that allow seamless supply purchasing. The prices are better, because of the size of the franchise community, which provides a marginal advantage over other businesses.
This results in better prices, faster deliveries, and better revenue.
- Training On-Site
Instead of trying to figure everything out, the franchisor provides lots of training to their franchisees. There are extended courses help at HQ, which are followed by on-site training for weeks.
Best practice manuals and progressive support is part of the process, which leads to consistent and blissful business experience.
The Disadvantages of Franchising
Next on, the cons of working with a franchise. Once again, there are only four mentioned in this article.
- Required High-Value Assets
In general, before starting a franchise with a franchisor, one must prove their financial worth. This often means that they have to have a certain quantity of liquid cash, as well as meet the requirements and franchising fees.
If these are unmet, the franchise is not awarded.
- Fees Don’t Stop
Even though brand recognition is very important, franchise owners will have to pay for that presence throughout the length of the contract. Royalties can be quite large, with the cost of using the brand and designs, ranging from 3% to 8%.
Advertising royalties are part of the fee structure as well, which might also range in the same numbers. And most often, that royalty comes off the top end.
- Lack of Control
Franchisors often have control over what products are sold and bought. They also control the services provided. This means that potential local upsells and personal creativity are discouraged.
In some locations, this might mean that the franchise will not have long-term viability.
After investing all of the money and time to build the franchise, the agreement will expire, and might not be renewable. Once the agreement expires, the branding must be removed from the business.
It can still operate independently and is free from restriction, but this limits access to products as well as changes the vendor relationships.
And that’s it for the pros and cons of franchising, as well as the entirety of this article.
Franchising Done Right
Now that you know what franchising is, as well as the pros and cons of franchising, you are well on your way to deciding whether or not you would like to try it.
In any case, whatever you choose to do, it will be the right thing to do. If you’re interested in similar articles, feel free to check out our filtered categorical pages at the top of the website.