What are franchises to begin with? Franchises are businesses that allow others (franchisees) to operate using their name and model. You technically own the business, but you have to follow a set of rules and regulations presented by the franchise business owners (franchisors).
So, prior to starting a franchise, what are the advantages and disadvantages you need to know of?
- Higher success rate than startups
- Low failure rate
- Better finance security
- Reputation as a franchise is already a well known established name
- Loyal clientele
- Little room for independency
- Share of profit with the franchisor
- Rules/regulations which must be followed specifically
- The reputation of another franchise can affect yours
There are several types of franchises:
Manufacturer: A franchiser gives the rights to a manufacturer to make, produce, and sell the products using its name.
Business format: Most popular franchise type. This occurs when the franchisor gives all the rights, trademarks, names, etc to the franchisee. Think of it as the franchisor walking you through all the steps that need to be taken. This is done by a fee that the franchisee must pay in order for the operation to run independently. (Ex: you can get the same Zara sweater in London as you can in California)
Product distribution: Simply put, you (the franchisee) distribute the products of the company. This is a bit more freeing than business format franchising as it does not include nearly all the rules, which gives more independence to the franchisee. (Ex: Coca-Cola, automobile/aircraft parts)
So before stepping in and officially making a decision – make sure you gather all your facts about launching a business! And if you ever need help with that, contact us for a free consultation!