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Advantages and disadvantages of franchising

Buying a franchise can be a quick way to set up your own business without starting from scratch. There are many benefits of franchising but there are also a number of drawbacks to consider.

Ten advantages of franchising

The risk of business failure is reduced by franchising. Your business is based on a proven idea. You can check how successful other franchises are before committing yourself.

Products and services will have already established a market share. Therefore there will be no need for market testing.

You can use a recognised brand name and trade mark. You benefit from any advertising or promotion by the owner of the franchise - the 'franchisor'.

The franchisor gives you support - usually as a complete package including training, help setting up the business, a manual telling you how to run the business and ongoing advice.

No prior experience is needed as the training received from the franchisor should ensure the franchisee establishes the skills required to operate the franchise.

A franchise enables a small business to compete with big businesses, more so than an independent small business, due to the pool of support from the franchisor and network of other franchisees.

You usually have exclusive rights in your territory. The franchisor won't sell any other franchises in the same territory.

Financing the business may be easier. Banks are sometimes more likely to lend money to buy a franchise with a good reputation.

You can benefit from communicating and sharing ideas with, and receiving support from, other franchisees in the network.

Relationships with suppliers have already been established.

Read more advantages of franchising.

Eight disadvantages of franchising

Costs may be higher than you expect. As well as the initial costs of buying the franchise, you pay continuing management service fees and you may have to agree to buy products from the franchisor.

The franchise agreement usually includes restrictions on how you can run the business. You might not be able to make changes to suit your local market.

You may find that after some time, ongoing franchisor monitoring becomes intrusive.

The franchisor might go out of business.

Other franchisees could give the brand a bad reputation, so the recruitment process needs to be thorough.

You may find it difficult to sell your franchise - you can only sell it to someone approved by the franchisor.

All profits (a percentage of sales) are usually shared with the franchisor.

The inflexible nature of a franchise may restrict your ability to introduce changes to the business to respond to the market or make the business grow.

Read more disadvantages of franchising.

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Advantages and disadvantages of franchising

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Skip to main content Advantages and disadvantages of franchising Buying a franchise can be a quick way to set up your own business without starting from scratch. There are many benefits of franchising but there are also a number of drawbacks to consider. The risk of business failure is reduced by franchising.

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The franchiser won't sell any other franchises in the same territory. Financing the business may be easier. Banks are sometimes more likely to lend money to buy a franchise with a good reputation.
You can benefit from communicating and sharing ideas with, and receiving support from, other franchisees in the network.
Relationships with suppliers have already been established.

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some businesses that have advantages include pizza hut, Starbucks & McDonald's

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No prior experience is needed as the training received from the franchiser should ensure the franchisee establishes the skills required to operate the franchise. A franchise enables a small business to compete with big businesses, more so than an independent small business, due to the pool of support from the franchiser and network of other franchisees.

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You benefit from any advertising or promotion by the owner of the franchise - the 'franchiser'. The franchiser gives you support - usually as a complete package including training, help setting up the business, a manual telling you how to run the business and ongoing advice.

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You can check how successful other franchises are before committing yourself.
Products and services will have already established a market share. Therefore there will be no need for market testing. You can use a recognized brand name and trade mark.

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Your business is based on a proven idea

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Anyone can buy and list up a franchise as long as they have sufficient spacing and funding

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The franchisee is not completely independent. Franchisees are required to operate their businesses according to the procedures and restrictions set forth by the franchisor in the franchisee agreement

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Simpler business Financing

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Franchising is seen by many as a simple way to go into business for the first time. But franchising is no guarantee of success.

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Franchising is seen by many as a simple way to go into business for the first time. But franchising is no guarantee of success.

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having a franchise can help with relaxation a it makes the process less stressful and more comfortable

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Bad performances by other franchisees may affect your franchise's reputation.

Buying a franchise means ongoing sharing of profit with the franchisor.

Franchisors do not have to renew an agreement at the end of the franchise term.

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Buying a franchise means entering into a formal agreement with your franchisor.

Franchise agreements dictate how you run the business, so there may be little room for creativity.

There are usually restrictions on where you operate, the products you sell and the suppliers you use.

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•Franchise - buying an existing business and gaining the right to use an existing business idea.