Positives and Negatives of owning a franchise

Positives of Franchise Business

Reduced Risk

The likelihood of success is higher and risk is minimized in franchise business, because the business
formula is already proven and it is running successfully in the native land. The products, services, and
business operations are already well established, so it is expected to develop well in global locations as
well.

Financing

The franchise is a business that would have already undergone a trial by fire and succeeded. So, it is a
safer option to invest in franchise business. This makes it much easier to finance, as far as getting loans
from banks. If a franchise's success and reputation can be clearly shown to the bank then the process of
getting finances becomes much simpler and easier.

Brand Recognition

The brand will be already well established both nationally and internationally. Global franchise
Marketing would have been done already by the company itself. Consumers usually prefer getting
products from a well-recognized and trusted brand. So, there will be a boost in sales from the early
stage itself.

Franchisor Support

The franchisor will stand as a support system for you in all terms of business. Especially when you own a
franchise business where the origin of the company is from another country you need to have at most
supervision to succeed. The franchisor will guide and assist you in all forms.

Franchise Training

You do not need to have prior knowledge about the industry or business. Franchisors will not just train
you, but also your team in providing adequate knowledge to run a successful international franchise
business.

Negatives of Franchise Business

Lack of creativity

In a franchise business, you should follow the business plan and operations as mentioned by the
franchisor. You will not get a chance to showcase your thoughts and your creativity will be restricted.
This is a major drawback in franchise business.
Cost

The initial investment of taking up a franchise business can be higher than you expect. Also, many
franchises charge ongoing royalties chopping into the revenue of franchisees. You also must pay
additional costs to equipment, store, overhead, and marketing supplies.

Association Problem

Your franchise business success depends upon the franchisor reputation. If the corporation develops a
bad reputation in the industry, then it will affect your business as well. How much ever you put your
efforts to present the franchise outlet, success is built upon franchisor reputation.

Split In Profits

In the international franchise business, Profit share can vary between 20%-50% depending on how much
amount of investment the franchisor is bringing into the business. The downside of profit sharing is that
the consensus on decision making can be a bit sloppy and can often lead to disagreements.

Limited Exit Strategy

If you want to get out of the franchise it is way too difficult and sometimes it’s impossible to do.
Franchises have strict rules, that is hard to follow. You must always abide by the rules mentioned in the
franchise agreement.

Investment depends upon the business to choose to take-up a franchise. Both low and high investment
franchises are available.