Friday August 14, 2020

updated - August 14, 2020 Friday EDT

Advantages and disadvantages of franchising your business

Mar 08, 2012 10:02 AM EST | By Staff Reporter

Franchising offers many advantages as a method of expanding your business, but you must also consider the disadvantages of this business model.

Advantages of franchising your business

    A franchise network requires far less staff than a similar sized network of corporately owned outlets.

    Franchising benefits from the investment of others (the franchisees) to help grow the business - making expansion much more cost     effective.

    A fee will be paid by the franchisee both at the start and ongoing.

    Once the right systems are in place, a business can expand at an impressive rate - limited only by the ability to recruit, train and           support franchisees.

    The business is likely to become much more robust as it is underpinned by determined franchisees.

    A franchise network can start to benefit from bulk buying and other cost and operational efficiencies.

Disadvantages of franchising your business

    The business is reliant on the right systems being put in place to protect the brand, the franchisor and the rest of the network.

    There is still a significant investment to make in ensuring the right advice is taken, documentation produced and systems put in place, before you start.

    The franchisee pays you an ongoing management fee, but they take the rest of the revenue earned from their efforts.

    Franchising a bad business will just provide a bigger bad business.

    You cannot franchise an idea - you have to have operated and proven the system first.

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