Franchises are a very attractive business model; different reasons such as allowing rapid growth, carrying less risk or allowing access to economies of scale, make them very attractive in the eyes of entrepreneurs. But is it all so good, or do they have drawbacks?
Well, no, it’s not all good. Franchises are not magic solutions, they require as much dedication, investment and work as other businesses, because that is what they are, a business. And like all businesses, they require a dose of work and bring a dose of risk.
But also, in the case of franchises, a series of obligations and commitments are created that do not appear in other business models, and furthermore, in them it is fundamental that both parties worry about generating reciprocal benefits and are always very attentive to the final consumer.
Pros for the franchisee
The most striking advantage is being able to benefit from the prestige that the brand enjoys in the market, ensuring customers from the very beginning of the activity. But in addition, the franchisee already knows how the business is going, that is, he or she knows if it is safe and can check the results.
Something very important nowadays is to be known on the Net, so the franchisee can already benefit from the good positioning of the business on the Internet. You can save unexpected reactions from the market, since previously the brand has already done tests in pilot stores and in others that are part of the chain, so that part is overcome.
Of course, the franchisee also benefits from something very important, the “know-how” and experience that the company already has in advance, plus they usually have tools as necessary as a good computer support control, security in the supply or economic advantages of purchase, to benefit from the advantages of the economy of scale of the chosen chain.
On the other hand, it is important to know that the risk of starting a business is reduced in the case of franchises, and that with this business model we ensure area exclusivity.
The image we inherit from the company, provided it is clear, provides us with greater solvency in relation to third parties, and it is also much easier to have greater brand awareness and a good commercial image.
Even if our business is at a local level, we will be able to benefit from the company’s campaigns at a national level. And of course, we will have previously received initial training, and we will always be able to recycle ourselves with a permanent training and information support, adapted to the latest techniques that the chain is following.
In short, the franchise allows us to benefit from the advantages and tools provided by a large company, although we are a small and local business, and always with the advantage that we are being our own bosses.
Cons for the franchisee
The first drawback would be the fact of losing a good part of the freedom that would be given to us by setting up a business that is absolutely our own, which makes the franchisee lose part of his or her business independence. This is also directly related to the fate of the franchiser, in other words, if he or she carries out a bad management, we will be affected even though our work is impeccable.
We are going to invest a lot of time, effort and money in the business, but in reality, we are not the owners of either the name or the commercial brand that we work with, so sometimes we can become overwhelmed thinking that all our effort is actually for the benefit of someone else. In addition, and despite being dedicated to the business as if it were our own, any contribution we make will be merely consultative, as we do not have executive power.
When it comes to starting up, we may lack data or knowledge about the chain, without being able to be 100% sure that it is profitable, reliable, etc. Also, when taking the first steps, it may happen that we do not receive at the right time the planning and organization to be followed by the franchisor, which complicates things a little, that is, starting well does not depend only on us.
During the life of the business we do not have total autonomy either, so sometimes it is likely that disagreements will arise, and we will not always agree with some of the franchiser’s philosophies in different aspects of the business.
The economic part can also be a disadvantage, since we will have to pay part of the benefits that the business gives us, permanently and punctually, to the franchiser, whether we have done very well, and there are many benefits, or it has been a disastrous month.
In a nutshell, be well informed from the beginning if you want to invest in franchises. Franchising is an interesting way to start a business, but you must make sure that you pay for what suits you, and in exchange for acquiring what you do not have or are not able to do yourself.