What are 3 advantages of a franchise?

It’s no surprise that many people considering opening a business of their own turn to franchising as there are a number of advantages to joining this industry.

The main benefit of becoming a franchisee is that the business will have an established product or service. In franchising, someone has already done the work of developing and establishing a viable business system. Rookie mistakes will likely have already been ironed out.

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Part of that established business system is another large benefit of franchising: the brand. Whether it's on the local level, international level or somewhere in between, the branding of a franchise can serve as an advantage before and after you invest. Familiarity can help you develop a customer base because of potential patrons through a pre-existing knowledge of what to expect from that brand.

Other common benefits to franchising include:

• Access to training programs for franchisees before they open their business. Many franchisors also offer ongoing training opportunities so franchisees can benefit from new developments in the franchise’s industry.
  
• In some cases, the obstacles to getting financing could be lessened. Lenders take into account the franchisor's experience and reputation when deciding whether or not to lend money.
  
• When problems arise, franchising gives the franchisee an avenue to technical support and qualified staff who can give advice.
  
• Franchise systems can offer purchasing efficiencies through economies of scale. Some or all of the needed products will be offered by either the franchisor or trusted suppliers. Franchisees can often take advantage of bulk discounts as well.
  
• Advertising and marketing assistance. The corporate offices of franchises often perform marketing research, which leads to better targeting and more effective ads. The pooling of resources also helps keep costs reasonable.
  
• If franchisees would like to sell their business at some stage, the franchisor can help locate a new buyer (often with a fee) and assist with the necessary arrangements, as opposed to an independent business owner having to oversee every step of the process alone.

Some words of advice: Before you enter into a franchise agreement, do research on the company you're considering becoming a part of. Check out the success of the franchisor and its reputation before making a firm commitment.

After opening, you must work just as hard as if the business plan were your own to reach your personal business owner potential. Though there are some elements that differ, the key to success with franchising is the same as with an independent business—hard work. Success is not guaranteed simply because you are using a business plan that worked for someone else.

Some businesses don’t want to expand by recruiting more staff and opening more offices because of the added costs, risks and responsibilities involved.

For these businesses, franchising can be a better alternative because the franchises are set up in locations near to the people that are demanding their products or services. This allows the business owner to focus on supporting the franchisees from one location and ensures that all their customers’ needs are met.

However, according to Carlos Garcia, the franchisor of Total Clean, franchising is not an easy way to grow your business.

“It will demand a lot of your time and dedication in the early years,” he says. “The return on your investment is long term and it may be many years before you trade into a profit.”

The table below shows more advantages and disadvantages of franchising for the franchisor:

franchising-tableAdvantagesDisadvantagesExpansion can be faster because franchisees provide the labour and their sales provide the growthFranchisees cannot be managed as closely as employees and they may have different goals to the franchisorFranchisees are responsible for their company’s success so they are more motivatedFranchise recruitment can be slower and less efficient than employee recruitmentFranchisees may be more talented at growing the business and turning a profit than employees would beFranchisors earn royalties from sales. Franchisees earn money from profits. Achieving growth in both isn’t always possible, potentially causing conflictThe franchisor puts relatively little money into new locations as this comes from the franchiseeFranchisees don’t always work together like employees might, thus losing any potential collective benefitSuccessful locations can return high royaltiesThe upfront investment (time and money) required can be huge – a pilot operation may need to be testedConsistent operations across the business generally means improved efficiency and higher quality levelsSelecting one wrong franchisee can ruin the reputation of the whole franchiseFranchisees should be fully committed due to the investment they put inSharing confidential information with franchisees is risky if they are not fully committed to the business

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The information and tools contained in this guide are of a general informational nature and should not be relied upon as being suitable for any specific set of circumstances. We have used reasonable endeavours to ensure the accuracy and completeness of the contents but the information and tools do not constitute professional advice and must not be relied upon as such. To the extent permitted by law, we do not accept responsibility for any loss which may arise from reliance on the information or tools in our Insight Hub.

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