The Pitfalls of Buying a Franchise

Buying a franchise seems to be the shortcut to success when opening a new business, due to the goodwill the company may have compared to that of starting afresh. Franchising has opened a lot of opportunities for budding entrepreneurs who are eager to start up their own business; however the franchising process is trickier than it might appear at first glance. In this article, we will be looking at the pitfalls of buying a franchise.

Cost of acquisition and operation

A major downside of buying a franchise is its cost; it had been heard of people paying enormous amounts just to use a franchise name. As a franchisee, you would be expected to pay a fixed amount at the initial stage, before signing the franchise agreement. You will also be required to pay the franchiser for support and training provided and in and in effect, these payments will end up reducing your profit each month. Most of these issues are not felt when you have and run your own business.  Here is a video showing you what to expect in regards to cost.

Stringent rules to follow

Franchises come with a lot of guidelines, and you will be expected to follow them all. They may include restrictions on advertisements, restrictions on pricing, guidelines on how to prepare it (for a food product) and lots more.

Most people are very good at following instructions, while some find it difficult being told what to do. So franchising is mostly for those who are very good at following instructions.

You might be restricted to certain suppliers

One way business owners raise their profits is by going for the supplier with the best and cheapest offer, however in a franchise agreement, these can be restricted as you would have to buy from the franchise established supply network. This whole setup will definitely have a dig at the franchisee’s profit and it is a glaring disadvantage.

Limited expansion potential

Being a franchise also restricts your business growth potential, as you would need the franchiser’s permission (obviously pay more) to carry out any expansion, you can’t open more branches as it is when you own your own business. So a franchise doesn’t so much support expansions.

Effect from others in the franchise

A franchise associates your business to the big brands, so any good or bad thing associated to that brand, will also affect you. For instance, if the franchiser or any other franchisees does something to destroy the reputation of the brand, then the whole drama would also affect you. It could lead to a drop in customers and profit. So a franchise exposes your business to external influences which you cannot control.

Are you planning on buying a franchise? Then these are some of the downsides you need to consider before making that deal.

How to Find Franchises Worth Buying

How to Find Franchises Worth BuyingAre you looking forward to seeing yourself as a franchisee?  With a franchise, you can have the opportunity to offer services and sell goods that are well-known to consumers. Plus, owning a franchise also gives you the opportunity to get training as well as support that will help you in attaining success. However, it is important to note that buying a franchise is just like any other businesses or investment out there where success is not a hundred-percent guarantee.

Because of this reality, it is important to learn some important reminders that will help you in making a good decision as to whether or not a particular franchise is a good option for you. Here are some important bits of information that you need to know first before getting in the way to buying a franchise that is worth buying.

The Business Model of a Franchise

As a franchisee or investor, a franchise is something that enables you to run a business. Once you have paid for the franchise fee, you’ll get a franchisor-developed system, the right and power to use the name of the franchisor for an agreed period of time and assistance. In most cases, franchisors usually provide their franchisees with the following:

  • Finding an appropriate location for the outlet
  • Initial training
  • Operating manual
  • Pieces of advice regarding management, marketing and personnel
  • Support in the form of newsletters, a website, scheduled seminars or workshops, toll-free phone number, etc.

On Choosing the Right Franchise

The following are some important things that you should consider when choosing among the plethora of franchises found on the market today:

  • Name Recognition. When planning to buy a franchise, one of the most important things that you need to consider first is the brand or franchisor’s name. A franchise with a high level of popularity is well-established and exudes good reputation as well. In short, a well-established franchise can easily be recognized by people within a particular area. This can be easily determined by way of asking or simply observing people around. A good franchisor has a striking name and that its products or services are equally popular, remarkable and highly recognized by many people as well.
  • Length of Experience. A franchise that is truly worthy is the one that has already spent an acceptable length of time in providing products or services either locally or internationally. Take note that the wider and larger the audience range of a franchise, the better it is for you; and the longer the experience of the franchisor in the business, the more chances for you to spell out success.
  • Good Reputation. Of course, this is something that wraps up our list of guidelines for buying the right and effective franchise in which you can invest your money on. A franchise with a good reputation simply gets the support and loyalty of many people around. This is true because no one wants to patronize a business with a poor or bad reputation, right?