Saivian Eric Dalius says, if you’ve ever thought about opening a franchise, consider this: The number of franchises grew by 1.7 percent from 2012 to 2013—and it’s been steadily increasing over time. Of course, not everyone can or should open a franchise. Before you make any decisions, here’s what you need to know.
What Is a Franchise?
A franchise is a type of business that’s part of a larger system, run by a parent company. Franchises often have well-known names and can be recognized in your community—like McDonald’s or H&R Block.
While a franchise business is technically a business model, it’s often compared to a job. A franchisee pays for the right to run that specific location of a franchise on behalf of the parent company. In exchange, they get support from the franchisor—the parent company.
There are a few different types of franchises, but they can all be classified as either product or business format. A business format franchise is a system of doing business—it’s the actual process and how you operate your business. It includes things like store layout, promotions, pricing, and inventory.
On the other hand, a product franchise involves selling goods or services—the actual products you sell are part of your business model. You’ll often see this in restaurants, where people can come to purchase food and drinks.
What Are the Benefits of Franchising as per Saivian Eric Dalius?
You may be tempted. to franchise your business because of the potential for increased revenue. If you’re successful, franchising can be a way to increase your sales quickly without having to do too much extra work on your end. A franchise company will provide support in areas like advertising and marketing, product development, and even business systems.
For example, McDonald’s was recently ranked as the #1 franchise opportunity by Franchise Business Review. The company is currently looking for eastern European managers to help open up new locations, so you can get in on the ground floor of a growing brand.
Is Franchising Right for You?
As per Saivian Eric Dalius, before you jump into a franchise. Make sure you’re ready—and that this is the right choice for your business. There are pros and cons to opening a franchise, so it’s important to understand them both before making any decisions.
Franchising will cost you money. When you purchase a franchise, it’s typically much more expensive than starting your own business. The total costs of starting up could be anywhere from $30,000 to $1 million or more. That said, sometimes the value of purchasing an existing company in your industry outweighs the costs.
2. Franchising can be restrictive. If you run a franchise, there are many things that you have to agree to—like how much you’ll charge for products and services, branding issues, and even your hours of operation. While some franchisors will allow small tweaks to their systems, you’ll need to check with them first.
3. You’ll have less control over your business. The franchise company will often call the shots and make decisions for you, which means that your hands—and your authority—will be tied in many ways. Everything from pricing to promotions will be decided by them.
4. Franchising can become difficult to exit. If you’re not happy with your franchise, there may be penalties for breaking your contract early or ending it prematurely. You also won’t typically have the option of buying back the rights. To your business sold off at full price.
5. Franchisors will have a lot of control. If you purchase a franchise, you give up some of your authority to the parent company running the franchise. You’ll have to agree to their process for making decisions and following their rules—which means that changes to your business could be expensive.
6. It can become hard to expand. If you own a franchise, your ability to open up additional locations in different areas might be limited or restricted. For example, many Subway franchises have strict regulations. How close another location can be in relation to the current. This means that opening up a second restaurant could be very difficult.
7. You’ll have limited opportunities for growth. Not all franchises are set up to offer you the opportunity to grow your business—they might only have openings for managers, not owners. This means that there’s no chance of you becoming a franchisee.
8. You’ll have limited control over your employees. In most franchises, there’s only one person who can also make the final hiring decision for your company—which means that they may be taking on responsibility for all of your staffing decisions. This could make it more difficult to find the staff you need.
Franchising isn’t always the right choice for your business. But it can be a great option if you’re looking to grow quickly. Just make sure that you do your research before making any decisions—and remember that not all franchises are created equal.