It is quite likely that having decided to start your own business you might consider a franchise. A franchise is basically the sharing of a business idea; you will be buying the right to use the name of an already established business, that is familiar to many people. The person selling the opportunity is known as the franchiser and you will be known as the franchisee. Examples of popular franchises are Kentucky Fried Chicken (KFC) and MacDonald’s. A franchise opportunity will have its pros and cons.
- You will be acquiring a product that is already tried and tested.
- You will likely be given help with staff training.
- You won’t have to worry about stock as the franchiser usually supplies stock.
- You are given business advice to help you, such as that of location choice, staffing hours and regulations, advertising and promotion.
- It is easier for you to acquire finance. Banks will feel more secure loaning money to undertake a venture that has already acquired a status in the market place
- The franchiser has the real control; you do not have as much autonomy. You probably at some point have patronized or entered a franchise, or maybe quite a few, have you noticed that there is a large similarity in the products offered and also the look of the organization? That is because things are pretty much prescribed for each of these ventures
- Franchise ventures are usually very expensive and after paying a hefty price to acquire a franchise you will still have to pay a levy on sales or profit to the franchiser
- You will not have much flexibility since pretty much everything is chosen for you. You must use the franchiser’s name, stock and follow business practices laid down by them
Having said that, franchises can be quite lucrative ventures; most are expensive but depending on your area of interest you might find a franchise to suit your needs.
If you decide to buy a franchise, it is advisable that you seek the advice of an experienced lawyer who is familiar with franchise agreements. Make sure that you understand the terms of the agreement before you sign.