A franchise is actually licensing agreements between the franchiser and the franchisee. The franchisee purchases the right or ability to trade, produce, sell and/or operate a facility with the franchiser’s brand name and power. This allows the franchisee to leverage a successful brand as well as a business model/structure and essentially own their own business without having to put in too much in the way of ground work. The franchiser acts as guidance, processes and assistance to the franchisee.
Some of the advantages of this type of business ownership include:
- Owning a business without having to start from scratch
- Access to a large, established and powerful business network including training, development, financial and professional resources
- No experience required
- Less risky, arguably, than starting from the ground up
- Proven to be more successful than start up businesses
- Reputation, brand, name and existing customer loyalty
Some of the lesser positive elements of this type of ownership include:
- A formal, binding agreement with a franchiser, meaning you cannot change your mind (at least not very easily)
- Not as much flexibility to run your business exactly how you want. Somewhat creatively impeding
- Restrictions in terms of size and scope of operations
- If other owners or franchisees are not successful, can have direct harm on your reputation or success as an owner, despite the fact you are working tirelessly.
It is important to weigh the pros and cons and to make sure to choose a franchise that is well researched, established and makes sense for you, because it can be really hard to change your mind. As long as you’ve done your research in terms of the company as well as business ownership, a franchise can be a great way to establish a solid business. There are a wide variety of franchises available at any given time.