Advantages of a Franchise Business
Several years before, if one wanted to start his own business, his natural course of action would be to do it on his own, depending largely on his business instincts, limited know-how, and observation of the market. The advent of franchising, however, brought a big change in business. Many have since become rich because of franchising. Franchising has indeed many advantages.
You Own the Business – A franchise is a duplicate of a successful business concept. The franchisee owns the outlet, therefore, he hires his own employees and oversees the management its day-to-day operations. He has high stakes in the business because his money is involved.
Ready Market – When one buys a franchise, he is buying an established concept that has a good record of accomplishment. The franchisee is allowed the use of the company’s trademark and brand name. Because of this, the company is, in effect, giving the franchisee a license to market its products carrying a brand that is already familiar with the consumers. Many popular franchises have instant brand-name recognition and have created a loyal following among consumers. Therefore, the franchisee is getting into a business that already has a ready market.
Continuous Support from Franchisor – Although running his own business, the franchisee can tap the services of the parent company anytime he needs assistance. The services of the head office organization are available to him, too, whenever he needs help. Furthermore, many companies have field operations personnel whom the franchisor can call on to help him deal with any problem he may encounter in the operation of the business. Most franchises being offered nowadays are turnkey operations. Upon the signing of the franchise agreement and payment of the franchise fee, the franchisee receives the equipment and supplies required in running the business. Furthermore, the franchisor provides assistance in identifying a good business location for the new outlet. The company assists the franchisee in negotiating his lease, preparing plans for outlet layout, shop fitting, and furnishing his store. It also provides assistance in determining the appropriate stock inventory for the opening of the business. This kind of support and the other benefits under the franchise agreement is what sets franchising apart.
Training – The franchisee is given the necessary training to start his business and eventually run it smoothly. The franchisee as well as his employees are taught all the business systems of the company covering product preparation, quality standards, business controls, recruitment of personnel, and marketing. A good franchisor will provide training to the franchise staff on a continuous basis.
Lower Capital Requirement – Compared to a non-franchise business, less capital is needed in a franchised business since the experience and tested system of operations of the parent company would already have eliminated the unnecessary expense incurred through trial and error.
Buying Supplies at Lower Costs – The franchisee is able to procure all necessary supplies at lower costs because the prices are negotiated by the company with the suppliers in behalf of all the franchise units. Because of the size and projected regularity of orders, the franchisor is able to get huge discounts. Buying wholesale for the whole network means big savings for the individual franchises. This gives the franchises a big advantage over their competitors because they are able to reduce expenditures on a continuous basis. This procurement set-up is definitely more advantageous to the franchisee as against procuring supplies independently.
Extensive Promotional Campaigns – A franchise is the beneficiary of an extensive marketing campaign made possible by the sharing of the costs by the franchises. Many franchisees are required to shell out an advertisement royalty to the company as their share in the cost of promotional campaigns of the company, effectively spreading the cost among all the franchises. This accounts for the large marketing resources of the franchisor enabling the company to avail of the services of top-caliber advertising agencies. Being situated in highly visible locations and benefiting from a huge promotions budget is a potent combination that is difficult for competitors to overcome.
Continuous Research and Development Programs – The Company conducts continuous research and development programs so that the business can improve the existing products and develop new ones to offer to the consumers. The marketplace changes rapidly and businesspersons have to keep up with the pace. The chance to seize the opportunity of leading in the market is available for only a very short while. This stiff competition necessitates continuous research and development programs for the company and the franchise network to succeed.
Acquiring the Status of the Company – As a franchise network expands, its stature in business becomes bigger. Mall owners prefer to have popular franchises in their malls because they want to present their shopping centers as a one-stop-shop where everything that customers want can be bought. Therefore, a franchisee will encounter very little difficulty in obtaining a lease in ideal locations. Because a franchisee becomes part of the giant image of the parent company, he will probably find that running a franchised business is not only so much easier than being on your own, it can also be the best decision a franchisee has ever made.
Minimized Business Risks – Because the franchisee is buying a proven business concept, the business risks involved are largely minimized. The parent company has already resolved most, if not all, of the problem areas in its systems and procedures. What the franchisee is getting is a refined package of technical expertise, marketing strategies, and operational systems.
A Unified Set of Quality Standards – All franchise units are required to maintain a single set of quality standards insofar as product, customer care, and service are concerned. Here, the company will ensure that these standards are strictly adhered to and maintained in all its franchise units so that the whole network presents an image of providing quality products and services.
Benefits for the Franchisor – Franchising is a business concept that benefits the two parties involved. For the franchisor, franchising is advantageous because rapid growth can be more feasible even with minimum capital expenditures. When franchisees pay the franchisor for the chance to copy a proven business strategy, franchisors receive a steady flow of cash from royalties, which can be used to expand further. Franchising a business can be like hitting two birds by the same stone: a franchise is being paid to expand it. Moreover, because others operate individual retail stores of the business that the franchisor originally established, direct managing responsibilities become the obligation of the franchisee. Hence, the franchisor will have more time in his hands to explore ways to further develop and promote the business.
The only way to develop as quickly is through franchising. Expansion is the only way a company can realize maximum profits. In franchising, there are not many obstacles to stunt the expansion of a company, therefore, there is a big possibility of really expanding the franchise network not only in the country but also even overseas. At present, franchising is the only business concept that can make that possible. Franchised businesses grow rapidly, sometimes having several outlets in a certain area, pushing the competition out. All these benefits for the franchisor are, in turn, advantageous to the franchisees since the franchises are largely dependent on the success and stature of the parent company.
No other business concept can offer such an attractive and beneficial arrangement.
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About the Author
Matthew Anderson is the founder of The Franchise Shop, a directory of some the UK’s best franchises and a resource for franchising information
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