Starting a business from scratch can sometimes be overwhelming for first-time entrepreneurs. That's why investing in an already successful franchise may be a good solution for your new business venture.
What is franchising?
Franchising is a way of distributing products and services. The original business owner (the franchisor) grants a licence for the use of the trademark or trade name for a fee. The person who buys the franchise (the franchisee) is allowed to use the franchisor's business name and operating system to set up the business. As a franchisee, you pay the franchisor a certain amount (royalties) from your franchise's profits. Normally, the franchisor would draft a franchise agreement with you that includes details about how the franchise will be run.
What are the advantages of owning a franchise?
- You don't have to come up with an idea for a new business.
- You get help with business start-up (equipment, suppliers, training).
- You can buy your supplies in bulk.
- Your business benefits from existing brand name recognition.
- An established supply chain and customers are already in place.
- Buying into a successful franchise can be profitable.
What are the disadvantages of owning a franchise?
- Franchises are all run the same way, so you have less flexibility to run the business the way you would like. This can sometimes be frustrating if you have your own ideas on how the business should operate.
- Generally, the more successful the franchise is, the more expensive it is to buy.
- There are ongoing costs, such as royalties and advertising.
- Some franchisors may not provide a lot of support, such as training or mentoring.
- Franchise agreements generally favour the franchisor, so be sure to have your own lawyer review the agreement carefully before signing.
- The location of the franchise is at the discretion of the franchisor.
- There is not a lot of legal protection available for the franchisee.
What franchise is right for you?
There are several online tools available to help you find the right franchising opportunity. You can search for franchises by brand name, investment level, industry, available locations, and more. Find out what franchise opportunities are right for you.