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Advantages and disadvantages of franchising your business

View profile for Karen Edwards
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There are many advantages to franchising your business – one of the greatest being that it’s possible to achieve a fast growth without making a large capital investment. Franchisees invest their own money and are keen to keep costs low and sales high. It’s an excellent way to create new outlets for your products or services.

Starting a franchise allows the franchisor (the company that’s allowing their name to be used) to become more well known. More consumers come in contact with your products and the franchisee pays start-up costs and fees for the business. The aim of becoming a franchised company is to create more income for the company and these fees help increase the revenue and cash flow of the franchisor.

Opening a new business can be very costly – a franchisor sells the franchise licence and has no financial obligation to the new business. Each franchise hires its’ own employees and the franchisor is not responsible for pay and benefits. Other benefits include operating, advertising and distribution costs, since these are paid by the franchisee.

The franchisor sets out rules in the franchise agreement as to how the franchised business is to be run – the franchisor does not run the business. As long as the franchisee does not break any contractual issues he can operate the business as he sees fit.

Karen Edwards, Commercial Solicitor, says “The selection process for choosing individuals for franchising can be very time consuming. Once a franchisee is found and begins operating their business the franchisor’s role is to provide guidance and support and this can be time consuming as well.”

Not all businesses are suitable for franchising and even those that are, do not guarantee success. The franchisor cannot control whether a franchisee’s business is going to fail or succeed – he can only provide guidance and support. If a number of franchises should fail it could have a detrimental effect on the core business.

For a free initial meeting please call 01202 499255 and Karen or a member of her team will be happy to discuss any questions you may have.