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The Benefits and Costs of Investing in a Business Franchise

The Benefits and Costs of Investing in a Business Franchise

In the franchise business model, the franchiser allots certain privileges to the franchisees to conduct approved commercial activities like advertising products and broadcasting for a certain period of time. Such a business model is an alternative to others, such as the independent and corporate expansion model via chain stores that reduces the liabilities and risks for the franchiser. Though not an equal partnership, the franchise business model benefits not only the franchiser but also the franchisee by way of such things as transparency, legal advantages, and proper research. Like any other business model, the franchise business model has its own share of benefits and costs.

Reputation

The franchise business model has long been well established in competitive markets where it has amply proven itself. This greatly decreases the risks involved and is just one of many reasons that people are usually confident in investing in a franchise rather than trying to start their own business from scratch.

Networking

Unlike other business models where an expensive third party or even simply oneself is the only path ahead, the franchise business model has a network of franchisees to draw from for financial support, encouraging collective communication and brainstorming that boosts the entire system’s commercial success quickly. This also allows franchises to meet with potential franchisees before investing in a forum. They are able to share both the positive as well as negative aspects of investing in a franchise for the greater common good. Investors will get a clear idea of what they would be getting into before committing.

Brand Recognition

Franchises usually have a solid advantage in that they can maintain brand recognition and, so long as the franchise remains reputable, allow new franchisees to make sales and profits and network quickly. Relationships already established in other markets can be tapped into as well at any given time. Review apps and websites also greatly benefit franchises by way of search engine optimization as they help increase their visibility online and elsewhere.

Scalability

Business franchises are designed to have a great deal of scalability that allows them to reap more benefits as they grow. This means they can expand into other markets fairly easily allowing them to save more time for management of a self-sustaining entity and spend less time having to conduct the business itself.

Ongoing Support

The support and help of the franchisor, who is of course invested in their own franchise, is instrumental in ensuring that the business franchise will ultimately be successful. This support includes everything from choosing a location to dictating operational affairs that are provided before, during, and after the opening of the franchise business.

Hiring & Training

Franchisers help staff the company by seeking out only the best-suited candidates for hiring. They also offer comprehensive training to employees and franchisees to help make sure the company is run at its optimal capacity.

Lower Costs & Risk

The franchise negotiates lower costs from vendors, which allows franchisees to save more money that can then be used for other parts of the business. As the franchise can typically negotiate directly with and buy from the vendor without going through a third party first, small transaction fees are eliminated almost entirely or at least greatly reduced for the franchisee. The time and money saved, as well as lack of capital required, when investing in a franchise or opening a new site means that there is often a reduced risk that the business franchise will not be successful. This in turn creates confidence in investing in them. It is for this reason that franchise opportunities continue to grow each and every year.

Location & Site Development

Franchisers help provide the best possible location by consulting with realtors and other professionals to determine a location with close proximity to other relevant entities and target demographics. After that, they help with developing the site and can even negotiate delayed or reduced costs involved in development.

Not all franchises satisfy the minimal criteria necessary for investing and ensuring success. Those that do offer and deliver on proven services that best set clients up for attaining their goals, alongside invested and qualified management team members, always willing offer a helping hand in finding the best opportunities on the market. Though it is nearly impossible to guarantee the ultimate success of any investment, investing in a franchise involves lower risks and offers a better chance of success.


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by Rayanne Morriss // Rayanne Morriss is currently working towards her BA from Oregon State University. She loves to write, read, travel, and paint. She enjoys finding new coffee shops with friends and expanding her cooking skills with her husband.

Opinions expressed by contributors are their own.