Posted on: 30 January 2015
Becoming a franchisee removes the need to build a brand, establish systems and processes and train staff, which can be appealing. However, it also removes some of the flexibility and autonomy that an outright business owner might enjoy.
The table below shows the advantages and disadvantages of franchising for the franchisee:
|A successful franchise means that the business model is proven||Franchise fees and royalties can be a major expense|
|Franchisees don’t have to build the brand or set up the systems and processes to run the business efficiently||Initial franchise costs can be very high and it can take two or more years to turn a profit|
|Some of the major banks offer competitive rates for lending to franchisees||Franchisees cannot adapt the brand, systems or processes to suit them and niche markets in their area|
|A degree of independence that you might not achieve as an employee||Having to comply with the franchise agreement can restrict growth in some areas|
|The franchisor may have already sold the product or service to the customer – as the franchisee you may only have to service or supply them||If the franchisor crumbles it can take all its franchisees with it, even if they are successful businesses in their own right|
Consumers expect and receive certain quality levels because of the adherence to the franchise agreement
|When the franchise contract expires all goodwill goes to the franchisor|
|Training, procedural, process and managerial support are all ongoing||Profit margins can be hampered by franchise fees and levies|
|Operating under an established brand with a strong reputation makes profile-raising easier||Relationships between the franchisee and other businesses they might like to work with may be restricted under the Franchise Agreement, potentially hampering growth|
Use the content guide below to answer your franchising questions:
- What are the advantages and disadvantages of franchising?
- Does my business suit the business model?
- What do I need to consider when setting up the franchise?
- What are my options for funding a franchise?
- How do I recruit the right franchisees?
- What are the advantages and disadvantages for the franchisee? (You are here)
- Will I suit the franchise model?
- Where do I find franchise opportunities?
- How do I choose the right franchise business?
- What questions should I ask before buying?
- How can I finance becoming a franchisee?
- How do I make my franchise successful?
The information and tools contained in this guide are of a general informational nature and should not be relied upon as being suitable for any specific set of circumstances. We have used reasonable endeavours to ensure the accuracy and completeness of the contents but the information and tools do not constitute professional advice and must not be relied upon as such. To the extent permitted by law, we do not accept responsibility for any loss which may arise from reliance on the information or tools in our Knowledge Centre.