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To Franchise Or Not to Franchise

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					To Franchise Or Not to Franchise?
Careful thought must be undertaken with any major financial decision you
make. If you've considered starting your own business, you've probably
heard about franchising. There are many advantages to franchising, rather
than starting an independent business. Of course, there are disadvantages
as well, and some types of people may prefer to start their own business.
One big advantage of choosing a franchise instead of starting an
independent business is that the company/franchisor will take care of a
lot of the financial and operational details for you. The franchisee must
pay a fee, but they do not have to worry about losing money the way an
independent small business owner would have to. In most cases, the
company would also provide or train employees for the franchise, ensuring
their quality and saving training costs for the franchise owner.
Keep in mind that although the company would take care of a lot of the
financial hassle, the franchisee will still need to pay a fee and have
capital. The franchisee must have a stake in whether or not the franchise
does well. Otherwise, the company could not ensure that the franchise
would be run with sufficient dedication.
Another thing to consider as a benefit of franchises is that if a company
is expanding, it indicates that they are probably doing well. This
profitability, combined with ensured name recognition when the franchise
is opened, should mean good business right away and will motivate the
franchisee to be even more successful.
Franchises can also be more profitable than independent businesses
because of the efficiency that the main company can achieve. The
franchisor is able to get discounts on real estate and raw materials,
which makes the company stronger. This strength and profitability gets
passed along to the franchise owner, and increases confidence in the
company.
However, there are some disadvantages to franchising, especially if you
are considering using a franchise with your already successful business.
If you already have name recognition and are doing well as an independent
business, you lose most of the advantages of the franchise, and you may
find yourself having to answer to a big company who will set policies you
don't like. The franchisee/owner does not get much say in decisions that
are made once they have decided to make their business into a franchise.
Furthermore, franchises involve more legalities than independently own
businesses and thus make take longer to set up. In addition, if the
company is not very efficient and well-operated, they may not be able to
deal with the rapid growth of their franchises, which could cause
problems for franchisees.
Blair Cavagrotti is in Marketing at WorldFranchising.com, a website that
provides franchise information to potential franchise buyers.

				
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