Franchise. Profitable or not?
Considering all possible options for starting a business, the possibility of acquiring a franchise comes to mind. Not many people wonder what lies behind this intricate concept. We will tell you about the advantages, features and disadvantages of this form of doing business.
The acquisition of a franchise, as an opportunity to open a company, has long been appreciated in many countries. And not without reason, because the development of any new company requires a lot of effort before it is possible to win the attention of consumers. Having your audience, a well-recognized and well-promoted brand, your company will function normally and bring decent profit for at least five years. Such indicators are confirmed in 80 cases out of 100, which is more attractive than losing a company in a couple of years, like most companies starting their development from scratch.
If you are aimed at active development, success and serious momentum, it is better to purchase a knowingly reliable, winning company, or rather a franchise. You, in this case, will be a “subsidiary” company of some of the largest associations with vast experience in doing business, developing strategies and choosing advertising. This gives an advantage and enhances your competitiveness, making the business truly profitable. You get the experience, knowledge and support that many dream of. The parent company will transfer all the necessary resources and knowledge, since there is also a material interest of the franchisor.
The acquisition of a franchise costs quite a lot, the amount varies in different companies. “Lump-sum payment” is the first of the features of starting a business when buying a franchise. A one-time fee is not refundable and gives you the right to open a company under the franchisor’s brand.
Royalty. Another feature will be the need for monthly deductions to the account of the parent company of a certain percentage of the turnover of your enterprise. A kind of rent can be associated with advertising costs to increase brand awareness.
The franchisor not only provides recommendations on the organization and conduct of business, but also puts forward rather stringent requirements for the company to comply with the standards adopted by the trademark owner. One side of the coin will be a guarantee of success, the other is a constant reminder of the existence of a dominant force that can not only raise your company. Starting a business with a franchise purchase has quite convenient characteristics – the cost level will be calculated in advance by the franchisor’s specialists.
Do not assume that by paying a lump-sum payment and transferring a monthly commission, you can conduct a carefree business. As with other methods of running a company, you will plan the costs of advertising, equipment purchases, rental premises, pay for staff time. In this case, you will have to comply with many of the requirements of the franchisor.
Weigh all the conditions; does the franchise always ensure success?
Among the advantages we note:
– guaranteed recognizable trademark, brand;
– accelerated process of promotion of the company;
– access to monumental and expensive knowledge, analytical data and marketing solutions, verified at similar branches;
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– the opportunity to learn all the intricacies of doing business within the walls of the parent company;
– consulting support from experienced marketers and other analysts and specialists;
– savings on the conduct and number of advertising companies;
– in some cases, the franchisor provides trading equipment and other attributes;
– a clear regional location prescribed in the franchise agreement.
For all the pleasures you will have to pay not only with finances, but also with some inconveniences:
– the high cost of the franchise. In most large well-known companies, a franchise is offered for a very large amount, and the requirements for brand compliance are quite stringent. The exclusive right to a trademark attached to a certain region increases the cost of the franchise, but also allows you to be out of competition for this brand;
– the activities of the company are clearly regulated, it is impossible to change various decisions without obtaining permission from the franchisor. Violation of a number of rules issued by the parent company will lead to the collapse of your company;
– the need to comply with absolutely all the instructions and decisions of the franchisor company down to the last detail, the impossibility of alternative solutions.
– High monthly fees for the right to work under the brand. Often companies set a minimum discount on royalties.
– the impossibility of creative development, embedding one’s own ideas for the development of the company;