Brief Business Helps - Franchising

February 3, 2017

Today more than ever people are looking for long term security and working independence by seeking out their own business opportunities. Attractive to many following this path is the idea of purchasing a franchise.

 

 

Benefits

 

The concept behind a franchise is the offering to prospective franchisees a turnkey opportunity to enter business, even a business of which the franchisee has no experience, with some training and support from the franchisor. For a franchisor it provides the means to rapidly expand their business using the capital and resources of the franchisee without relinquishing control of their business.

 

Operations

 

Contractual obligations of the franchisor include protecting the trademark, preserving the business concept and imparting certain levels of knowledge and services to the franchisee. The franchisee is obligated to carry out the services for which the franchisor is known, in a manner the franchisor demands and using trademarks and processes developed by the franchisor.

 

The franchisee pays an upfront fee to the franchisor for use of the trademarks, training, startup equipment/materials and lease and leasehold improvements. An ongoing sales royalty is also paid by the franchisee to the franchisor.

 

Advantages

 

Standardization of the appearance, trademarks and business process offered by the franchisor grants the franchisee an opportunity to learn a new business, receive setup support and open quickly. The franchisee can also draw on the experience of the franchisor and other franchisees in daily operations.

 

Disadvantages

 

Franchisees are bound by rules established by the franchisor, that if broken, might result in loss of the business. Royalties can become excessive if the business thrives. Franchise agreements seldom contain any type of performance warranties or guarantees by the franchisor. Training and support may not be enough to assure the franchisee a successful transition into the new business.

 

Considerations

 

Zip code site selections are not a good way to go. It is important to have a proper location analysis done by an outside source, as most franchisors do not go deep enough into location searches.

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