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Advantages of a Franchise Business
In deciding to start a business, many business-minded people choose to start independently from scratch. On the other hand, some have realized the benefits of franchising an existing business instead of starting one on their own. Indeed, franchising has many advantages. A franchise is an extension of a successful business but is independent to some extent. Thus, it has the distinct privilege of operating a unit with a ready market. A franchisee is allowed to sell the products of the franchisor under a brand name that is already familiar with the consumers. Many popular franchises have nationwide brand-name recognition. When one buys a franchise, he is buying an established concept that has a track record of success. In franchising, the franchisee runs his own business while enjoying the support and assistance provided by the franchisor on a continuing basis. The support and benefits provided by a franchise greatly minimize the business risks for the franchisee. Most franchises being offered nowadays are turnkey operations. Once the franchise agreement is signed and payment of the franchise fee is done, the franchisor turns over the equipment and supplies needed to start his business. The franchisee is also given the necessary training to start his business and run it smoothly eventually. In many cases, he is also assured of help with management and marketing.
Furthermore, the franchisor provides assistance in identifying a suitable business location or area of operation for the new franchise. The company assists the franchisee in negotiating his lease, preparing plans for outlet layout, shop fitting, and furnishing his store. It also provides general assistance in determining the correct stock inventory for the opening of the business. A good franchisor will provide support and continuous training for the employees of the outlet. Comparatively, the franchisee will normally have to prepare less capital than he would if he were to start a business independently since the experience and tested system of operations of the parent company would already have eliminated the unnecessary expense incurred through trial and error. Franchisors make money from the franchise fee, royalties, sales of equipment and raw materials, and etc. which came from huge number of franchisees which result to huge money. The franchisee benefits from the lower costs of supplies obtained through the negotiating capacity and big purchasing power of the franchisor. This is made possible by the size of the franchised network. The huge volume provided by franchising let the company purchase in large volume for greater savings for the individual franchisees which in turn increase the profit as well increase its competitiveness. The collective buying power of the parent company allows it to buy in bulk and the savings is passed along to the franchisees. Therefore, supplies will cost less than if one were running an independent company. The franchisor trains the franchisee as well as his employees in all aspects of the business. This includes product preparation, quality standards, business controls, recruitment of personnel and marketing. He is allowed access to trade secrets, processes and the use of the trademark of the company. All the franchise outlets benefit from the year-round promotional campaign and advertising programs of the franchisor. at a cost lower than when attempting such marketing independently. Most franchisors obligate franchisees to pay an advertisement royalty to the franchisor for high quality materials or medium for promotion.. The large marketing resources available enable the company to avail of the services of top-caliber advertising agencies. The marketplace changes rapidly and businessmen have to keep up with the pace. The chance to seize the opportunity of leading in the market is available for only a very short while. The only way to develop as quickly is through franchising. A company can only realize maximum revenue by expansion. Because, in franchising, very few impediments can hamper the growth of the company, there is a big possibility of having thousands of units throughout the world. At present, there is no other business concept that can top that. As a franchise network becomes bigger, its reputation in the marketplace becomes one of size and success. Mall owners prefer to have popular franchises in their malls because they want to present their shopping centers as a one-stop-shop where everything that customers want can be bought. Therefore, a franchisee will encounter very little difficulty in obtaining a lease in ideal locations. Franchised businesses grow rapidly, sometimes having several outlets in a certain area, pushing the competition out. A franchise is the beneficiary of an extensive marketing campaign made possible by the sharing of the costs by the franchises. Being situated in highly visible locations and benefiting from a huge promotions budget is a potent combination that is difficult for competitors to overcome. Franchise companies enlarge quickly, and have a very high potential for expansion. Franchising can be beneficial to both the franchisor and franchisee. From the perspective of the franchisor, franchising is advantageous because rapid growth can be more feasible even with minimum capital expenditures. When franchisees pay the franchisor for the chance to copy a proven business strategy, franchisors receive a steady flow of cash from royalties, which can be used to expand further. Franchising a business can be like hitting two birds by the same stone: a franchise is being paid to expand it. Moreover, because others operate individual retail stores of the business that the franchisor originally established, direct managing responsibilities become the obligation of the franchisee. Hence, the franchisor will have more time in his hands to explore ways to further develop, promote, and expand the business, from which the franchisee also benefits. Because a franchisee becomes part of the giant image of the parent company, he will probably find that running a franchised business is not only so much easier than being on your own, it can also be the best decision a franchisee has ever made
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