subject: Franchise Versus Starting Own Business [print this page] When you are looking to start your own business, buying into a franchise can have its good and bad points. To start, it would be important to know what a franchise is.
A franchise is a right granted to an individual or a group to market a company's goods or services within a certain territory or location. It usually consists of a system of suppliers, store management policies, coordination of branding and set pricing on products and services. This is done to match the other franchise locations culture and marketing habits so customers get a similar experience at every location they visit.
So why franchise over starting your own business? Well for starters, a franchise is usually a proven successful system. This can ultimately kick-start a new business and save time for a new entrepreneur by limiting a learning curve that may otherwise be costly with first hand mistakes.
Another good feature of franchising is that the distribution channels are usually very automated and products can be shipped very efficiently. The franchisee will usually get terms on the goods right away, which can aid in having readily available inventory to sell.
Franchise systems usually have in place ongoing training and educational upgrading to further enhance the skill set at the business. This can include work safe practices, selling techniques, and specific skill upgrades to name a few.
These are the main benefits of starting a franchise, but what are the cons? Not every successful business is a franchise, so why would a business decide not to become franchised?
Depending on the contract that a franchisor writes up, the franchisee may feel limited in the decisions on how to operate the business. Sometimes franchises are so big that they're management policies may not necessarily be agreed upon by all store managers, and can create conflict or deterrence. The argument is how can corporate executives know exactly how each store is operating when all they usually have are daily and monthly reports to refer to?
Franchising usually has an initial cost of start-up a will have some sort of royalty expense or time expressed dues that must be paid to keep the licencing agreement. These expenses do cut into a business owner's bottom line profit.
The question that new business owners must ask is will the benefit outweigh the cost of becoming a franchise versus starting your own independent proprietorship? Always conduct thorough research on any franchise you are looking at and consult with a franchise attorney before making any serious commitments.
Franchise Versus Starting Own Business
By: Adam Vetter
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