PROS AND CONS OF STARTING A FRANCHISE
It can be. Price Waterhouse Coopers in a recently completed study sponsored by the International Franchise Association estimates that about 1 in 12 retail establishments in the US are franchises and $1.15 trillion in sales (about 40 percent of all retail sales) were made through franchised establishments in 2001. While not every franchise or every franchise owner is successful, franchising has the potential to reduce some of the risk of launching a new business by letting you copy a business concept someone else has already made successful.
Depending on the franchise, among the benefits you might gain are:
| a business concept with a track record for success
| name recognition for the business
| management training
| access to proprietary methods and/or processes used in
the business
| a ready-made business or marketing plan to follow
| ready-made ads, brochures, and other sales and
marketing aids | |
The security you acquire by franchising business methods and practices has its price.
Among the drawbacks of being a franchise are:
|
Your start-up costs can be high.
| You will have to follow the franchisor's rules. That means you might have limitations placed on everything from what products and services you sell to what goes into ads, where you are allowed to sell, and even how your business is furnished.
| You pay a percentage of your sales and/or a flat fee to the franchisor (company from which you purchase the franchise) each year.
| Your success is dependent in many respects on the brand, talents, foresight, and stability of the franchisor.
| You will be locked into the terms of the contract with the franchisor whether your operation is successful or not. |
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