Advantages and disadvantages of a franchising business

Understanding franchising

Are you a business owner or thinking about the expansion of business? Well, here is the solution, franchising. A well-known and proven business strategy which is a kind of contractual agreement. In this agreement, a retailer (a franchisee) agrees with a producer (a franchisor) to offer services or goods in exchange for a commission or a specific amount of fee. It helps to bring recognition to your business. Tying up with a titleholder company can be a good booster in terms of building brand image and enhancing the scale of the business. 

Franchising is an excellent option for small businesses as they are unable to invest in capital and finance. It’s a sure shot way to success. 

Advantages of Franchising 

Starting a business and maintain consistency in the same is not an easy task. Multiple challenges come in the way of realizing one’s dreams and objectives behind establishing a business. However, having a business, franchising can solve all your miniature hurdles. It can minimize the distance between you and the success that was your dream. For people who are looking for kick-starting their existing business or start a new one, franchising is the answer. 

Here are some topmost advantages of business franchising to go through and make up your mind:

(i) Sustenance of business: 

One of the best benefits of business franchising is that it caters facility to operate under a known banner, a company that is already established. Since the business is old and created enough, you will get guidance with tried and tested methods.

(ii) Getting recognition:

Recognition is on what businesses depend on. It makes consumers rely on brand image and prefer it above all the others. An already established organization provides a small business with manifold benefits. You will need to employ less cost and workforce under that banner, which would be more in the opposite case. Choose medspa franchising business opportunity and witness a timeless sustained growth of your business. 

(iii) Easy business financing:

Since financing companies hardly trust start-ups and then come difficulties in financing. Start-ups require a backing of a well-established and renowned company on which the financing agents can have trust. Investors are also attracted to such firms. It will make the life of the new-budding business simpler. 

(iv) Support and Security:

Business franchising proffers security and comfort to your business. Business franchises provide training schemes and account and sales management. You receive advertising benefits, as well. 

Besides security and support, your business is less likely to fall with business franchising. It builds a positive image of the company in the market and generates faith among both customers and investors. 

Disadvantages of business franchising 

Everything in life has two aspects. So is the case with business franchising. Moreover, business is all about risks and a spirit to overcome them. Opting for a business franchising brings some disadvantages. One must not fool oneself that the advantages of business franchising can outweigh the cons. Because a business owner must always remember that he is beginning right from scratch. However, all this can be tackled if you have sought after a reliable and trusted brand. 

Here are some disadvantages to keep in mind before going for business franchising. 

(i) Lack of control: 

It is the first and foremost disadvantage of franchising. The business has got no control over it, and its running or the power is very limited in some cases. The rules are already decided, and they are a part of the agreement. The established business decides the operation of the company.

(ii) Tied to dealers:

While running a business, low costs are needed. Besides, you will need the cheapest dealers to minimize expenses and to maximize profits. Since you are a part of a franchise, it’s an obligation to use the supply network of the franchise. As per the franchise agreement, you will be bounded to the dealers. It’s a distinct disadvantage because potential profits will decrease in this scenario. 

(iii) Others’ risk: 

A business franchising has a chance of damaging your business reputation. You will have to rely upon the particular brand for bringing in customers. Having a knock-on influence in your business is likely to happen, in case other franchisees do something intending to ruin your business image. It can affect both overall profits and sales figures. 

(iv) Costs of the franchise:

Prices are one of the most significant disadvantages for most franchisees. You would have to pay an initial amount to enter an agreement with a renowned company. Also, for agreement continuance, the franchisees pay an on-going fee. This fee helps them to avail of the training and support. In the long run, it is a kind of potential profit restriction, that you could have earned as a business franchisee.