Franchises, when and why to consider them

Franchises, when and why to consider them

From fast food to real estate promotion, franchises are a business model very particular that due to its enormous advantages represents an interesting option for every entrepreneur.

Of course, the rise of this commercial system has generated endless brands and options from which to choose.

Today we will expand on the advantages and disadvantages of acquiring a franchise and we will talk about when and why should they be considered.

It is said that the franchise model as such was born in the 40s in the United States and its success was such that it has expanded throughout the world, allowing today a wide variety of options in price and market lines to acquire.

However, as in everything, although there are very good franchises, there are also those with enormous weaknesses and disadvantages.

For those who are not fully documented about the franchise business, we will start by defining them as follows: A franchise is a business system It was born as a work agreement between two entrepreneurs who decide to partner strategically to guarantee the success of both. On the one hand we have the franchisor who has developed a business and a brand with recognized success and who offers another (franchisee) the possibility of marketing their products under the same brand and enjoying all the experience and knowledge, in exchange for financial and financial compensation. royalties.

The franchise system is attractive to entrepreneurs because unlike starting a business from scratch and building it with the effort of years, you can acquire a recognized franchise, set up your business and have at least 50% of the success assured practically immediately.

Advantages of acquiring a franchise (for the franchisee):

  • Possibility of acquiring a business with proven success
  • The support of products and brands with recognized prestige
  • Lower financial risk and therefore higher chances of success
  • You don’t need to learn the business by trial and error
  • Use and take advantage of the franchisor’s knowledge and experience
  • Enjoy regular training and updates
  • Share the benefits of economies of scale among franchise partners
  • Share advertising benefits and brand presence
  • You don’t have to search for suppliers
  • Guaranteed product inventory
  • It usually has regional exclusivity
  • It is backed by a centralized organization

However, not all franchises are commercial heaven and in fact, if not chosen properly the disadvantages can be counterproductive.

Disadvantages of investing in Franchises:

  • Your dependence on the franchisor restricts your skills and possibilities as an entrepreneur and you must adhere to the established rules and guidelines
  • Decisions are made by the franchisor almost 100%
  • Lower direct profitability since royalties must be considered for the franchisor or franchisor
  • Higher initial investment in infrastructure
  • Initial payment for rights, contracts and licenses of the franchise
  • You have no ownership of the brand
  • You must access permanent regulations and supervision from the parent company

The key to success

In conclusion, we will say that with all the disadvantages that this business model may have, franchises are still an excellent option, especially since there are very good brands with excellent support that will help you to have guaranteed success.

The key however is in the careful choice of franchise, so it is advisable before signing a contract, carefully study the terms and deadlines thereof and above all analyze the history of success of the brand in order to ensure that you are willing to invest and work under the specifications established.

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