Taking a franchise has been called the “business with the least fears and tears.” It is the business with the least tears because the franchisor makes it easy for you to get into it. However, lest you be misled, going into a franchise business does not carry with it a guarantee for success. Therefore, you still have to weigh the advantages and disadvantages of owning a franchised business.
Pros
– Established brand and customer base. You get the strength of the franchisor’s brand and the loyalty of its customers.
– Marketing support. Franchises often have the support of national campaign, as well as ready marketing materials for a local campaign.
– Reputable suppliers. Franchisors often have established relationships with suppliers for all the materials they need to run the business.
– Training support. Some of the better franchise operations offer management and technical training.
– Financial assistance. Loans are sometimes provided to help franchisees.
– Ongoing research and development. You can concentrate on operations because the franchisor spends time and money developing new products or services.
– Calling the shots. As in any business you can go into, you are the boss and you control your own destiny.
Cons
– Initial payout. You have to pay for the franchise fee and start-up costs. The bigger and more established the franchise, the more money you need.
– Royalty payments. The monthly royalty – equivalent to a certain percentage of the monthly gross sales – must be paid the franchisor. This means a reduced income for you.
– Marketing and advertising fees. To receive marketing support, you may need to pay these fees, depending on the contract.
– Limited creativity and flexibility. Most contracts have very explicit standards, allowing little or no alterations. You must use their system and follow their rules.
– Sole sourcing. Some contracts stipulate franchisors must buy supplies from a restricted list of suppliers.
– Locked into operation by contract. You may be stuck for many years with the wrong franchise.
– Dependence on franchisor success. The reputation of your franchise is only as good as that of the franchisor. Should he fail, you fail with him.
– Risk. There is always risk in going into business, franchised or not.
Source: Your Guide to Starting a Small Enterprise -dti.gov.ph
