Buying a franchise is an alternative to starting your business from scratch. These are the areas I will be discussing:
a good way to jump start?
What is a franchise?
Advantage and disadvantage of buying a franchise.
Test to see if the Franchise opportunity is suitable for you
Looking for a lucrative franchise? Here are some for you to consider - watch their videos here.
What is a franchise?
The simpliest definition of a franchise is a business clone.
The most successful franchisors develop a system for reproducing the business to the smallest detail. When the franchisee buys a franchise, he rents the franchisor's trademark and method of doing business which involves a standardized approach to delivering a product or service.
Many people consider buying a franchise is a short cut for starting a business because the y assume the franchisor is selling business success; he or she has created a successful business, and therefore, the franchise business you buy will automatically be successful, too. This may not be so.
A franchise has three elements:
The use of a common trade name or trademark
The payment of an initial license fee
The rendering of "substantial" assistance.
Use of a commontrade name or trademark
Company can use a common trade name or trademark using many different programs which may include, any of these would be one form or another of buying into a franchise:
Payment of an initial license fee
The fee for buying into a franchise fee can be as little as a one-time $500 payment, or "indirect" franchise fee payments, such as the profits derived from the sale of product or services to a "licensee".
Rendering "substantial" assistance
When buying a franchise, the assistance the franchisor render can take the form of
an operating system
a proprietary computer program
helping the "licensee" develop a marketing plan
Why buy a franchise?
When a person buys a
franchise, he or she is purchasing someone else's
"system", trade name and learning curve. In return, the Franchisor
receives money, normally both an
Initial Franchise Fee and weekly or
While there are some success stories, buying a franchise cannot be
viewed as a short to business success. Not everyone is cut
out to be a franchisee.
Advantages of Buying A Franchise
Lower Failure Rate - When you
franchise, you are
buying an established concept that has reasonably been successful.
There is a ready mentor and someone to hand-hold you through your
initial startup years.
Jump start - Many good franchisors
provide their franchisees with all the equipment, supplies and
instruction or training needed to start the business. In many cases,
you also get ongoing training, and help with management and marketing.
Your franchise will reap the benefit of the parent company’s national
Buying Power - Franchisees benefit
collective buying power of the parent company as the franchisor can
afford to buy in bulk and pass the savings along to franchisees.
Inventory and supplies will cost less than if you were running an
Disadvantages of Buying a Franchise
Whose Way? - To
keep the image of the franchisor, franchisees are required to do
everything the Franchisor's way - right down
to the table cloth colour. To some extent some franchisees
feel that they have very little autonomy to their own businesses.
High Costs – Besides the initial licensing fees, there's
royalties, a percentage of your franchise’s business revenue that will
need to be paid. In additioin, many franchisors require
franchisees to share their advertising and marketing costs.
Ongoing Support Not all
franchisors offer the same degree
of assistance in starting a business and operating it successfully.
Some are render help during the startup phase, everything after startup
is up to the franchisee. Others make promises of ongoing training and support
don’t follow up on.
Franchise Suitability Checklist / Test
Not sure if the franchise opportunity you have at hand is worth
pursuing? The following checklist should help you decide.
If you unable to put a tick to any of the items below, you should really rethink the franchise opportunity at hand.
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