✪✪✪ Franchise Advantages And Disadvantages

Monday, July 12, 2021 12:58:36 PM

Franchise Advantages And Disadvantages



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A franchise store such as McDonald's can help business owners to achieve financial independence by getting on board with an international powerhouse that can almost guarantee a certain degree of success. Over time, McDonald's has grown to be one the world's largest corporations, with outlets in at least countries. Franchise organizations eliminate a great deal of the risk that most small business owners face, since franchises come with financing options, building and training assistance, marketing assistance and detailed methodologies that have been proven successful on the front line for years.

Franchisees are required to meet stringent up-front requirements for capital contributions and management experience, improving the chances of success even further. A wide range of business types operate under the franchising model. Fast-food franchises, in particular, may not always be the best choice for a franchise agreement. Fast-food companies such as McDonald's have been targeted in a battle against what has been termed the obesity epidemic, casting McDonald's outlets -- along with their owners -- in a highly negative light in the media and their communities.

Components sometimes can be purchased for less than it would cost for companies to manufacture those components themselves, and the components may be of higher quality. Apple is a good example of this. While its products are designed in the U. Information technology IT services also can be outsourced. For example, cloud computing and software-as-a-service SaaS offer companies access to computer services and tools that once were managed in-house by companies' IT departments. Outsourcing can free up cash, personnel, facilities and time resources. It can result in cost savings from lower labor costs, taxes, energy costs, and reductions in the cost of production.

While outsourcing has many advantages, it also presents some disadvantages. There may be some negative public relations impacts for companies when outsourcing results in the loss of a large number of jobs for workers in their local communities. In all likelihood, relationships with suppliers and perhaps distributors will already be in place and easy to manage. The advantages of already established relationships with advertisers and marketing teams may also be of benefit to the new business start-up. Franchises offer the advantage of a support and security system.

Often franchisors will offer training schemes and support with things like the management of accounts, sales, advertising and more. These sorts of things may well be included in the price of the franchise fee. The security offered by the franchise can give the impression that the business will be less likely to fail. People often think that another advantage of starting a franchise is that they will make more money. The fees that a franchisee pays to the franchisor often means a big cut in profit and due to the limits imposed by the rules of the franchise it is often less easy to invest the profits in a tax-efficient way as you could by forming a new limited company.

A franchisee might benefit from higher profits in the beginning, but in the long term, they will often find that starting their own business would have been more profitable. Just as with any business model, there are disadvantages to setting up a franchise. Quite often people are under the mistaken belief that the advantages outweigh the disadvantages, but this is because they are commonly blinded by the potential risks of starting a new business from scratch. The formalities of setting up a limited company under which the franchise operates will be the same as if you were starting your own business.

The first and most significant disadvantage of a franchise is the fact that the franchisee has no control of the business or how it is run or very limited control. The rules of the business are already established and part of the franchise agreement. How the business operates is set out by the brand of the franchise and it is very rare that a new franchisee will be able to operate outside of these borders. Finding the cheapest suppliers to minimise your overheads and maximise your profits. You will be tied to the suppliers dictated to you by the franchise agreement.

The obviously disadvantage for a franchisee here is not only the lack of control, but the reduction in potential profits. Another serious disadvantage of a franchise is the risk that others might damage the reputation of your business. As a franchisee you would rely on the brand of the business to bring you customers.

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