The primary benefit of franchising is risk minimization. Starting a new business is very risky. Numerous studies have shown that over 90% fail within three years. The main reason of such failure is due to the fact that owners have to go through the bedazzling learning curve of operating a specific type of business. However, with franchising, such curve is substantially reduced.
Another reason to purchase a franchise is that a franchise investment can be extensively researched prior to making any significant expenditure. Existing franchisees provide a wealth of information about the business so that beginner franchisees can try the business they purchase to make sure that it is a good fit for them.
Franchisers market a defined, proven business scheme of operation, offering a service or product that has sold successfully. An independent business is based on both an untested idea and operation.
The experience of a franchiser?s management team boosts the potential for success. This experience is usually conveyed through formal instruction and on-the-job training.
Franchisees can usually purchase lower-cost goods and supplied through the franchiser, resulting from the group buying power of all the franchises.
Established franchisers provide national or regional name recognition. While this might not be true with a new franchiser, the benefit of starting with one is the potential to develop as its business and name recognition grow.
Franchising offers a uniform method of operation, so that consumers receive the same quality, efficiently and cost-effectively. A uniform system brings numerous advantages of mass purchasing power, customer loyalty, brand identification, capitalizing on the proven business format.
A franchiser also offers management assistance, including accounting procedures, as well as personnel and facility management. A person with experience in these areas might not be familiar with how to implement them in a new business. The franchiser helps the franchisee triumph over this lack of experience.
Franchisers assist franchisees create a business plan. Numerous elements of the plan are standard operating procedures made by the franchisor. The complicated part of a new business is the start-up, since even experienced managers do not have the utmost knowledge in setting up a new business.
One of the greatest benefits of franchising is marketing. The franchiser can organize and pay for the development of professional advertising and promotion campaigns. The national or regional marketing done by the franchiser benefits all franchisees. Additionally, the franchiser can offer advice on how to create effective marketing programs for local area through a cooperative marketing fund, to which the franchisees add a percentage of their gross income.
It is possible to obtain assistance in financing a new franchise through the franchiser. The franchiser can make arrangements with a lending corporation to loan money to a franchisee. The franchisee must accept responsibility for the loan. The franchiser?s involvement often increases the likelihood that the loan will be approved.
A franchiser also offers training for the franchisee. This is especially significant if the concept is complicated. The best training merges classroom or one-on-one training done at the franchiser?s facility with field training done at the franchisee?s site of business.
Source: http://headlinenews.talkposts.com/2012/09/25/advantages-of-franchising/
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