Franchise Advantages and Disadvantages

Whether you choose to embark on an Affiliate Franchise or the most popular franchise around, Business Format, you will experience several advantages and disadvantages.

As stated before, a franchise is defined as a contractual agreement in which the owner of a business concept gives a businessperson the right to own and operate a business based on that concept.

Advantages of Buying a Franchise (Provided by Black Enterprise: Guide to Starting Your Own Business by Wendy Beech)

Name Recognition – When starting a new business, the biggest challenge is establishing your name. Customers have no idea what your new business is like, or what typed of products or services you provide. When buying a franchise, you are jumping right into an established name with a proven record of success.
Financial Support – There are many ways to obtain the capital necessary to purchase a franchise. You can secure a bank loan, ask family and friends, or contact the Small Business Administration (SBA) about a guaranteed loan.
Site Selection – Some franchises belong in certain locations. A franchisor knows where a hair salon, dessert bar, lawn care service, or tattoo parlor will generate the most sales. Most franchisors will assist you in selecting a site that will work best for your business.

Disadvantages of Buying a Franchise

High Cost – The costs of purchasing a franchise can be very expensive. The costs typically vary according to the type of franchise that you buy. The fee can range from $5,000 to $50,000 or more.
Loss of Control – Once you purchase a franchise, it is required to abide by a set of guidelines set forth by the franchisor and outlined in the franchise agreement.
Share in Problems of the Parent Company – Just as a franchisee experiences the successes of the franchise; he or she also has to bear the failures. Once you have bought into the name, image, products and services, you cannot separate yourself from the parent company when times get hard.

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