Franchise Business: for and against

Franchise is referred to as a set of services and goods transferred by the seller for money, that is the right to open your business according to a ready recipe, but under someone else’s brand.

The Franchising contract case

is a ready-made business, a fully developed and proven economic component and reputation. Entrepreneur is provided with break-even analysis and options for the best opening of the enterprise.

Among the main advantages is the spending schedule. It lists all possible spending. This item is especially suitable for those who start their business for the first time.

The company is already on the market, and it has confirmed its success. So, and exactly the same business plan of the new organization is guaranteed to get the attention of the consumer.

Pros

Franchisor assists both in the selection and training of employees. Usually the internship is carried out on the territory of already functioning enterprises. For only the opening point with a large staff of employees – this is especially important, because the training will be held both the managerial staff and the owner with co-founders.

The last argument will please businessmen with no experience. We offer micro-business options with a staff of 5 people maximum. Then the training will pass in a much shorter time frame.

There is no need for impressive spending on advertising. This task is assumed by the franchisor. And visitor traffic will provide a well-known brand under which it operates.

When opened, the beginner gets comprehensive instructions on what and how to do. For restaurants and cafes, the exact formulation is provided, shops have detailed instructions about laying out products.

Don’t have to think about suppliers either. The purchase of franchisees carries out at already approved by franchisor sellers.

The look of employees, the style of their communication with customers, is thought out to the little things. Operating under a well-known brand company causes trust among visitors, because they are confident in the quality of products and service.

The salary level is determined by the owner. No one restricts him in this matter, as the proposed scheme is only recommended.

Cons

But even such a winning project has its own buts. And such points include advertising fees, royalties and lump sum fee. A lump sum is called a lump sum paid to a franchisor for the right to use its brand.

Royalties — payment monthly. A brand’s “lease” can be fixed or equal to a percentage of revenue. Sometimes the “landlord” requires quite high deductions for advertising.

The

possibility of other deductions depends on the popularity of the company and the number of establishments open by franchise. And the higher the income, the more contributions will have to be paid.

Products are allowed to be purchased only from specified suppliers at a certain cost. There is no chance of purchasing the item at more winning prices from other sellers. And the price of products is pre-approved throughout the network, so it will not be possible to reduce the cost and increase profitability.

All franchisees have different criteria, but the work is performed only according to company standards. Innovation is not welcome. Violation of any clause may result in the cancellation of the franchise contract. Sometimes the products must be purchased for the amount stipulated by these canons, and the amount required for opening the case.

Such a business is most suited to beginners. The pros and cons in the franchise case meet all the time. At the same time it is necessary to take into account everything for and against such enterprise, because the same fact can become both a minus and a plus.

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