Advantages and disadvantages of buying a franchise
There are advantages and disadvantages in buying a franchise rather than buying or starting an independent business. Some of these are listed here.
Note: not all franchise systems will include these factors listed below.
- association with a well established brand, reputation and product or service;
- assistance with site selection, lease negotiation, site development, builders and shop fitters;
- assistance with outlet design and equipment purchasing;
- initial management training and continuing management assistance;
- access to group/national market research, along with advertising and merchandising assistance;
- access to established standard procedures, operating manuals and stock control systems;
- assistance in securing finance and sometimes financial assistance in establishing the business;
- access to financing packages which may be more attractive and easier to access than for non franchised businesses; and
- access to established financial systems and checks which can provide early warning signals to highlight trouble spots.
- less autonomy in some business decisions (franchisees generally have to operate the business according to the franchisor's operations manual);
- restricted territory in which you may operate and/or promote your business;
- ongoing payment of fees to the franchisor;
- less control if you decide to sell your franchise business as there will be a set of procedures for you to follow, including getting the franchisor's approval of the buyer;
- if you sell the business you will usually have to pay a fee to the franchisor as outlined in the franchise agreement;
- restraint of trade provisions on the sale or termination of the franchise that may be more onerous than required if a non franchised business is sold;
- at the end of the franchise term, the franchisor is not obliged to renew the franchise, in which case the business and its goodwill revert to the franchisor.
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