How Can Franchising Work For You?

Jim Fracker | November 25th, 2013

Purchasing a franchise might seem like a very daunting process, enough so that you might not even consider it a possibility for you. However, have you ever considered what advantages buying a franchise might bring to you? Before jumping ahead to the benefits, let’s first look at what exactly franchising is. 

What Is Franchising?

An entrepreneur who owns a start-up business or is just looking to delve into another line of business must consider many factors when developing their business plan. One of the business models to consider is franchising – acquiring another business. Franchising typically involves two parties, a franchisor – the seller of a franchise, and a franchisee – the buyer of a franchise. In the case of franchising, we usually see the franchisee or entity acquiring a franchise.

So what exactly is a franchise? A franchise is defined as a right or license that an entity (franchiser) acquires from an entity (franchisor) to gain access to the franchisor’s business knowledge allowing the franchisee to market a product or service within an identified geographic area. The products and services are typically unique to the franchisor’s business, for example: McDonald’s Big Mac.

Considerations For Franchising

Acquiring and owning a franchise is no walk in the park, but it certainly has numerous advantages and some disadvantages. While not all-inclusive, the following list represents some advantages and disadvantages to franchising:

Advantages:

  • There is higher likelihood for success of new business ventures. You aren’t entering into the business alone – you have the support of the franchisor.
  • The company image and brand awareness is already recognized by your potential goods or service buyers.
  • Franchises typically provide “systems” and guidance for many facets of your business.

Disadvantages:

  • Franchises come with a price. Most require an initial fee and then an ongoing fee based on sales or some other business metric in exchange for all the items discussed above on an ongoing basis.
  • Franchisees are typically required to operate their business within the confines of the franchise agreement. The franchise may limit business options available when compared to non-franchise business structures.

Does Franchising Make Sense For You?

If you’re an entrepreneur who is contemplating acquiring a franchise, you should carefully consider all the advantages and disadvantages to the process. Ultimately, you will need to develop a cost/benefit analysis to help you determine whether franchising makes sense for you.

Every entrepreneur should consider how he or she can develop a business that they can work “on” rather than “in”. You might be wondering what that means. The simple answer is that when an owner works “on” their business they are planning for the future (i.e. expansion, succession and growth) and not consumed with the day-to-day processes that take place within their business while working “in” their business. The systems, training and support a franchise can provide may allow an owner to work “on” versus “in” their business.

Franchising Help

If you’re interested in franchising, but are unsure about where to begin, contact Rea & Associates. Our team of Ohio transaction services professionals can provide guidance and support as you begin contemplating whether franchising is for you.

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One Response to “How Can Franchising Work For You?”

  1. Caryl Anne says:

    Great article! Starting a franchise isn’t necessarily for everyone; however, if the right person falls into place with the right business, great possibilities could happen! Thanks for sharing!

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