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Advantages and challenges of franchising.

The Advantages

Advantage #1--The Experience of the Franchisor

When an individual buys a franchise, he purchases the years of experience and the proven methods of the franchise system, also known as the franchisor. One franchisee expressed it this way: "What I have learned from the franchisor was worth ten times what I paid for the franchise." In any new business, much time and money are spent in trial and error. A proven franchise may eliminate many of the start-up problems. This reason permits one to open a franchise business with little or no previous experience in a given industry.

Advantage #2--Training

A franchise system will provide training for the new franchisee. This is usually done at the home office and at the franchisee's place of business. This training should prepare the new owner in all facets of the business.

Advantage #3--Buying and Advertising

Most small-business people cannot afford to inventory products in bulk or do extensive advertising. The franchisee buys this advantage when he or she purchases the right to use the franchise system's purchasing power and advertising. Most systems provide advertising help and direction. Furthermore, as the number of franchisees increases, so does public awareness of the franchise. This can be a tremendous advertising advantage. Also, franchisees that are located near one another can advertise together, thus reducing costs.

Advantage #4--Ongoing Advice, Research and Development

Franchisees need assistance throughout the term of their business endeavors. The franchise system's staff of experts can give this needed help in all aspects of the business. The franchisor is also in a position to provide on-going research and development. Thus, new products and services will be brought to the attention of the franchisee.

Advantage #5--Business Synergy

The word "synergy" refers to the idea that the sum of the whole is greater than the separate parts. This principle can be applied to franchising. Those who buy a franchise become part of a "family" where all members work together for the good of the whole. Indeed, there can be support and assistance in a franchise organization that assists everyone in becoming successful. Often, some of the most effective ideas come from franchisees who in turn share their ideas with the corporate office and with other franchisees.

The Challenges

Challenge #1--Working Within the System

People who have difficulty following directions or who dislike working within a system may find franchising extremely frustrating. Conformity to the franchise system is critical if consistency among franchises is to be maintained. However, there are areas such as marketing where a franchisee can be creative.

Challenge #2--The Risk

While it is true that purchasing a franchise has less risk than starting an independent business, there still are risks. Because you own the business, you, to a great extent, determine the success of your venture. The franchisor may have a great program and a respected name, but in the final analysis much of the risk is in your hands.

Challenge #3--Working With the Franchise System

Buying a franchise can be closely compared to entering into a marriage. Both are legally binding relationships that can last for a long time. Your relationship with the franchise system and its staff will be extremely important. Get to know the franchise system through the following methods:

A. Visit the corporate headquarters. Seek to get a feel for the staff and how smoothly the operation runs.

B. Talk to other franchisees. Ask what their relationship with the franchisor is like.

C. Read as much about the franchise as possible.

Challenge #4--False Expectations

Some people enter franchising expecting instant success. Perhaps the reason some expect this is the tremendous success achieved by some franchisees. However, this success did not come without hard work and great effort. Franchising, like any other business, requires tremendous time, initiative and industry. Obtain from the franchisor as realistic a picture as possible as to what is required in operating that particular franchise.

Challenge #5--Managing the Business

Some individuals are more prepared to manage a business than others. They have some business experience and have learned to get along well with people. Other individuals may find that managing a franchise is a tremendous burden. You must honestly assess your preparation to run a business. If you find that you have little or no experience, you may want to seek special assistance from the franchisor in business management.
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Publication:Franchising World
Geographic Code:1USA
Date:May 1, 2006
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