Now it’s easy for people to create a franchise business to gain profits.
There are a lot of franchisors doing “hit and run” by opening many branches and making the franchisee as a cash cow only. The maintenance is lousy and ultimately results in disappointment from both the center and its franchise partners.
Proposing a franchise is not easy, what else if a small capital. Do not expect to profit as presented by the franchisor. Business is business. Everything remains a risk that must be faced. However, at least by choosing the right franchise business, we will not regret it much later.
Quoted from the Companywarehouse.co.uk site, here are some advantages and disadvantages of a franchise business that you should know before running it.
A. Benefits of Franchise Business
All types of businesses must have their respective advantages, as well as the franchise business. The following are the advantages of a franchise business:
# Is the profitability of the franchise business greater?
If you say franchise business profitable, of course, profitable, but if we assume that the benefits of this franchise business will be greater if the franchise brand is well known, this is not certain.
With a franchise system there is usually a fee deduction, where the profits of a small portion of the partner will be the franchisor’s rights:
# Ease of financial management
Most investors prefer to give capital to a business that has proven to be strong in terms of financial and network marketing. Joining a franchise business provides benefits because the franchisee has established the financial management system. Franchise partners do not need to worry anymore about this as it happens with a business that has just started.
# Business management has been awakened
Franchise companies that have a good reputation usually have business management that can provide benefits to their partners. The business idea, brand name, and business management system of the franchise has been tested and only needs to be implemented in a new location.
# The brand is well known to the public
Brands that are well known to the public will make the marketing process of a franchise business easier, especially if the product being sold is a product that is needed and liked by the public.
This, of course, will be easier to market products that are sold to the community, so the costs and effort spent to build a business reputation are not as difficult when we build a business from scratch.
# Stronger support and security
Usually, franchisors provide specialized training to their partners before operating. This training covers financial management, marketing strategies, how to advertise, how to run a business, and others.
The training is usually included in the purchase of a franchise package so that partners will be facilitated in running their business according to good standards.
# Business cooperation has been established
Those who buy a brand franchise will get another advantage, namely business cooperation that has been well developed before. Some examples of advantages are in terms of suppliers of raw materials for products sold, advertising agencies, and marketing.
B. Weaknesses in Franchise Business
All types of businesses must have their shortcomings and challenges, as well as franchise businesses. Most franchise partners are not a problem with this shortcoming, but not a few prospective partners also decided to resign. The following are the disadvantages of a franchise business:
# Suppliers bind franchise partners
Usually, entrepreneurs will look for suppliers (suppliers) who offer smaller prices. This cannot be done if you have already bought a franchise business. If the franchisor has determined the supplier from the start, the franchisee cannot buy or choose another cheaper supplier.
# The existence of a franchise fee
Almost all franchise businesses apply a fee system to their partners. The franchisor will propose an initial fee to buy his franchise. Also, there are ongoing costs charged to partners, usually for training and support to franchise buyers.
# Cutting profits
In addition to the franchise fee, the franchisee must also pay royalties to the franchisor, that is, a deduction from the amount of profit that you get. If it turns out that you only have a small profit, then the benefit will still be deducted to cover the royalty fee.
But not all franchise brands have a system like this. So you have to ask about that from the beginning.
# Influenced on the reputation of other franchises
This is one of the biggest shortcomings of the franchise business. When their own mistakes taint the status of other franchises (for the same brand), your business will also be affected. Sometimes there can be a significant turnover decrease in all franchise branches if this happens to one of the partners.
# Franchise partners lack control
Franchise partners usually do not have full control over the franchise business that he buys, because the franchisor predetermines all systems. When partners want to innovate or change, it collides with the provisions and regulations that have been agreed upon from the start. Given these obstacles, your ideas as a franchise partner cannot be applied to your business.