Pros and Cons of Buying a Franchisee today

The advantages offered by investing in a franchise have grown considerably. In this day and age entrepreneurs are looking for the best possible opportunities and fast. They want to jump in to the next bandwagon that's available. So why should you consider a franchise? That's simple.

Advantages of a franchise

• Owning your own business. Because when a person works for himself, the efforts are recompensed fast and at a high level.
• A franchise allows many business objectives.
• A franchise is a part of a business that has already been established and is profitable for the original owner and has a mature customer base, which will reduce the risk of starting a business alone.
• The franchise allows to obtain the key to operate the business, the "know - how", the success in the market.
• A fast and safe development, since it has been demonstrated that people who go with franchises reach the success point quicker, which is needed in order to achieve long-term stability.
• The business has a brand guaranteed by the previous marketing activities, a prestigious brand, accepted and recognized both nationally and internationally.
• The franchisee will benefit from new developments in its network and will be implemented and paid by the franchisor, thus satisfying the demands of the market.
• The franchise is continuously updated.
• The franchisees pay to the parent company to provide the ability to implement important improvements in the system that was subsequently implemented in the main business successfully.
• Buying groups are cheaper. While your firm belongs to a franchise, you get more favorable purchasing conditions, more favorable payment terms and the security to obtain the materials. In addition you will benefit from the updated and comprehensive information regarding the franchisor's knowledge of the market and the sector.
• Plans for initial and ongoing training to give you the opportunity to work at a level regardless of your previous experience and success/failures.
• The franchisee benefits from a brand known nationally and internationally and investing large amounts in advertising both in newspapers, radio and television.
• The franchisee benefits from a brand with financing facilities, training and permanent assistance.

All this plus other benefits are added to the advantage of a franchise, but we also must provide the disadvantages of acquiring a franchise.

Disadvantages of a franchise

• When opening a franchise we must contemplate and cover the high costs of entry, the royalty and advertising.
• Disagreement between franchisor and franchisees can arise in the processes and they can have different opinions about the business methods.
• The low efficiency and other outlets of the network can seriously affect the image and reputation of your establishment.
• The franchisees have no freedom to make the necessary decision to run their businesses, this is the franchisor exclusivity.

In addition

• Sometimes you will receive poor service, support and assistance from the franchisor, because their interest is to attract new franchisees and not to care for what they have already collected on.
• Resource constraints that affect service delivery.
• Signing with an unethical franchisor who wants nothing to do with the building of the franchise’s name, and only wants to earn from selling its brand.

As you can tell it is important to analyze as many factors and aspects before purchasing into a franchise.

Source: http://www.ozcarguide.com/business-money/start-ups/796-pros-cons-buying-franchise

Mom and Pop vs. Franchisees: Pros and Cons

By Liza Porteus Viana

There are many advantages to opening up a franchise versus an independent store. But there are some disadvantages, as well.
When it comes to owning a small business, not everyone goes the route of starting up their own mom-and-pop shop. In fact, if a hopeful entrepreneur has no clue how to write a business plan and likes the idea of having a bigger “parent” company at their backs, opening a franchise might be the better option.
But does one really feel the same sense of ownership with a franchise as an independent small business? It is possible - under certain conditions, that is.
“I think what you find in the most successful franchise systems is a group of franchisees who feel completely integrated into the culture of that business, who feel completely part of the fabric of the way that particular company operates,” said Matthew Shay, president and CEO of the International Franchise Association. “For franchisees to really feel integrated into that culture, there needs to be a very strong sense they’ve got ‘ownership’ over the brand, over the units – ‘this is really our thing’ … It needs to be a collective sense with the franchisor.”
In the United States, there are about 900,000 individual franchise units -- that includes the total number of franchisors AND franchisees (ie Jamba Juices, McDonald’s, Wendy’s and the like) across the country. The number of franchisees is significantly less than that, as many franchisees own multiple units. This may be because once a franchisee knows how to “work” the franchise system, he or she often then will open multiple franchises in different areas. For example, a Burger King owner may have 10 of the company's franchises, as well as a car wash.
There are many advantages to opening up a franchise versus an independent store, including: the franchisee can operate under the parent-company’s business plan, name recognition, corporate logo, trademark and can utilize all its training and support resources in exchange for an initial franchise fee plus ongoing royalty payments; national marketing is up to the franchisor, so the franchisee can focus more on being the direct “face” of the company to consumers; franchisees also can minimize the amount of financial risk involved in starting their own business; landlords and property owners may be more likely to give a franchisee prime space knowing the track record of the franchise; and franchisees also often benefit from volume purchase agreements.
“They do see themselves as independent,” said Giovanni Coratolo, vice president of small business policy at the U.S. Chamber of Commerce. “They know how to operate within that system. They’re entrepreneurial within that franchise system. … They know how to expand and invest within that system.
“There’s a dynamic relationship” between the franchisor and franchisee, he said, and it is to the advantage of both to see the individual businesses succeed.
But there are some disadvantages, as well. As, for one, franchisees don’t have total control over what they can do with their own store.
“There are give and takes – sometimes it’s not a totally harmonious relationship,” Coratolo added. “They [franchisees] don’t consider the parents a boss – it’s a contractual relationship.
The business plan often will specify hours of operation, colors of the corporate logo and other details. Some franchisees may be required to purchase from certain distributors or to offer certain promotions, and to agree to termination clauses, which essentially say the franchisor may have the right to terminate the franchise agreement if certain items are not met.
Franchisees may face other stipulations in the franchise agreement, according to the American Franchisee Association, including a waiver of legal rights and freedom of association with certain organizations, obligation to purchase supplies from certain entities approved by the franchisor and non-compete clauses.
Franchisees “may feel somewhat constrained by some of the terms of the franchise agreement and they may want to make some changes, but it’s important for them to understand that the branding and the power of brand is consistency. You need to understand that going in,” said Bill Allen, a counselor with the Orlando, FL, chapter of SCORE, which is affiliated with the Small Business Administration.
Given all these pros and cons, experts agree it takes a certain type of person to be ready and willing to run a franchise versus an independent startup.
“Some entrepreneurs are so independent-minded they don’t want to give up control of any aspect of the business,” Shay said, noting that the decision should be based on one’s personality type. “For those business people, fitting into the structure of the corporate business” isn’t for them.
While a different dynamic than that for a typical mom-and-pop shop does exist, experts said there isn’t a total loss of identity as a franchised-business owner.
“The franchisee owner tends to feel himself very independent within the parameters of the franchise,” Coratola said. “They don’t look at themselves as a less of an entrepreneur just because they’ve elected to go within a structure.”

Source: http://www.foxsmallbusinesscenter.com/strategy/2010/01/28/mom-pop-vs-franchisees-pros-cons/