Advantages and Disadvantages of Franchising
Written by Samuel Muriithi for Gaebler Ventures
There are many franchising opportunities in a diverse range of businesses and all these can be harnessed by willing entrepreneurs. Purchasing a franchise comes with varied advantages and disadvantages all of which must be carefully considered before the big decision on the way forward is made.
Franchising opportunities abound in a wide range of business types.
Similarly, information about these opportunities is readily available and you just need to perform an online search to get the clues you need with regards to the capital and costs required to start up, the number of such franchises already in operation etc. Some of the franchising opportunities normally available include businesses dealing in clothing/shoes, cosmetics/toiletries, motels/hotels, automotive products/services, foods, printing, business aids/services, vending, real estate etc.
A number of advantages and disadvantages accrue from the decision to purchase a franchise. These should be considered by the prospective franchisee before the final decision to plunge into the business is arrived at.
Purchasing a franchise is advantageous in the sense that the entrepreneur will be dealing with an already established product. One of the most difficult issues about selling a brand new product in the market is that it takes quite a long time for the same to get market acceptance; a franchise product knows no such challenges.
Consumers are mainly attracted to franchises because they are assured of consistent quality. Regardless of the location of the franchise they know that the fine services/products they acquired from one branch will be the same in another branch halfway across the globe. Once you purchase a franchise, all you'll need to do is to maintain the pre-determined standards – you'll hardly have any nasty surprises coming your way.
Some franchisors offer contracts that provide for their franchisees professional growth. Often, once you purchase a franchise you are given control for a specified geographical area. This means that the competition you face well into the future can only come from a different establishment and not from another setup from the same franchisor that you are under contract with.
Purchasing a franchise also, in most cases, means that you will be provided with management and technical assistance by the franchisor. The franchisor will do this with an aim of maintaining superior brand credibility. These types of assistance may include basic day to day management skills, advice on product and equipment purchases, customer service techniques etc.
On the other hand, purchasing a franchise has its fair share of negatives as well. First, a franchisee is supposed to make a regular payment to the franchisor moving forward. In the event that the value of services the franchisor offers does not at least tally with these payments, the business is negatively impacted financially.
In the initial stages of the business a franchisee may overly depend on advice from the franchisor. This is well and good but this dependence must be gradually decreased. The risk of becoming too over dependent on this advice is that common business sense may be clouded thus interfering with established business practices.
As an entrepreneur, before purchasing a franchise you should consider the fact that a franchising package often includes restrictions with regards to what can be sold, who this is sold to, pricing, geographical territories etc. A franchise business does not offer the total freedom that many entrepreneurs have as their primary motivation.
In direct contrast to the advantage of consistency previously mentioned, the failure of a single franchise branch may be wrongly interpreted by consumers to mean that the entire franchise is similarly affected. As an entrepreneur who has worked hard to uphold all the requisite standards, your efforts may be watered down by such events.
Samuel Muriithi is a business owner in Nairobi, Kenya. He has extensive international business experience in the United States and India.
Share this article
Additional Resources for Entrepreneurs