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Starting a business is tedious, expensive, and risky. It involves a lot of paperwork, market studies, coordination with concerned agencies, scouting for the right place, and providing a significant amount of money for lease, initial inventory, furniture, and equipment.
However, nowadays, those thinking of starting a business have the option to start from scratch or get a franchise from reputable establishments. Starting from scratch is good if the business has something innovative to offer and can sell its products at a competitive and affordable price. It also must find the right business site, near its target market, and be able to advertise well in order to make consumers aware of its products or services. This can take a long time, a lot of money, and an uncertain market response.
On the other hand, a franchise offers a good brand name and identity, a proven record of accomplishment, and a proven business strategy. Despite the fact that big businesses demand a hefty sum of money as a franchise fee, the benefits of franchising are still very attractive to many. A good franchise offers a total package that includes site selection, lease negotiation, personnel training, and store design. It also provides continuing support on marketing, quality assurance, and troubleshooting because it must protect its good name. More importantly, the franchisee benefits from a ready market because consumers already know the brand. Hence, in retail outlets, processes are standardized, quality is ensured, and customers have a sense of confidence about quality because franchises share a brand and central management.
“The main benefit of being a franchisee is that the business will already have in place the knowledge and experience of the franchiser that has enabled it to expand, which provides each franchisee with a solid business platform. Systems (such as product pricing, recruitment, and marketing) will be tried and tested as any early mistakes will probably have been improved. Therefore, this reduces the risk of failure compared to someone who is just starting a business separately”. (Kieran)
If marketing and purchasing are centralized, they result in economies of scale, which means lower costs and presumably higher profits. In franchising, retails benefit from advertising, marketing, and promotional programs handled by the main management, and they gain the use of the system, trademarks, assistance, training, and marketing. The franchisor’s business plan, operations manuals, and market analysis are also readily available.
Indeed, franchising can be advantageous for many reasons, because it means starting a business without the hassles of establishing it independently. It is easy to estimate the amount of money that is needed to fund the new franchise. Since they adapt business processes, they do not have to start with long experimentation and adjustment periods, so the risks involved are considerably reduced. Assuming that the franchise is run according to the contract, the initial investment can be recouped within a considerably short period.
Works Cited
Kieran, Diarmuid. “The Advantages of Franchising” Franchise Direct. 24-7 Press Release. 2007. Web.
Obringer, Lee Ann. “Advantages of Franchising“. How Stuff Works. Web.
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