Disadvantages Of A Franchise Business
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Naz Daud
Mar 24, 2013, 2:10:09 AM3/24/13
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Article Title: Disadvantages Of A Franchise Business
Author: Naz Daud
Word Count: 756
Article URL: http://www.isnare.com/?aid=149360&ca=Business
Format: 64cpl
Contact The Author: http://www.isnare.com/eta.php?aid=149360
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When you buy a franchise opportunity, you are buying much more than a just a business. A business which stands a higher chance of success compared to people who choose to start a business on their own. You are also buying into a business which has strict control and regulations as to what you can and can not do.
The franchisor will insist on certain quality standards being maintained. This is so that the end consumers receive a high standard product delivered in a way that they are accustomed to at other outlets.
You will be allowed to make small changes in the way you run your business compared to other franchisees, but the business will have to operate to a high standard and all the major decisions on the management of the business have already been taken.
Why is it like this? The franchisor has probably spent many years if not decades creating a business that works and can be sold successfully as a franchise. They have usually invested heavily in marketing materials, advertising campaigns, shop floor layouts logos and branding.
A poor franchisee can have a very detrimental affect on the group as a whole. The press loves it when something goes wrong in business and is quick to spread the news. It is essential for the franchisor to spend some quality time on the poor performing franchisees as the franchise network is as strong as the weakest link.
In return for all this support and ongoing training programmes the franchisee will have to pay a franchise fee at the outset and ongoing license (royalty) fees. These payments can make a huge dent in the profitability of the business so it is essential that you choose a franchise opportunity that not only has high margins but also decent turnover.
In the franchise business a prospective buyer has to tread extremely carefully. Not all franchises are the same. The market place is also evolving very rapidly. What may have worked as a business only a few years ago might not be a viable business opportunity now.
It is imperative that the franchisee takes advice about the current market place before buying into any new franchise. Trade reports are very helpful in this capacity and can be found very easily by a qualified accountant.
A decent franchise agreement is also essential. This should protect the franchisee as well as the franchisor. Too many agreements are biased towards the franchisor and these should be avoided at all costs. If you are not legal speak savvy then it is very important to get advice from a franchise lawyer.
Some franchise businesses which were very successful in the past are now struggling and a few will fold. Make sure that your accountant has a look at the financial reports of the franchise business that you are thinking of buying into. You need a strong franchisor on your side for many years to come.
There are even restrictions in the franchise agreement which cover in detail the processes involved in selling your business. The franchisor has to be satisfied that the buyer will make a suitable candidate for the business. They will charge the franchisee a fixed figure or a percentage of the final price achieved to cover their costs associated with creating new legal agreements, helping with the smooth transfer, doing credit checks on the potential buyer and providing long term support to someone who might not have any experience in managing a business.
What happens when a franchisor rolls out a new product that fails spectacularly? Usually the greatest loss is incurred by the franchise network. It is essential that these products are trialed in certain locations before a nation roll out.
Often the need for profit and the desire for turnover can lead to conflicts between the franchisee and the franchisor. This is usually due to the way royalty payments are calculated in the franchise agreement. In some case the franchisee could be forced into increasing their business even though they are happy with the current turnover and profitability of the business.
There are many other disadvantages to buying a franchise opportunity which I will cover in later articles. In all fairness though, if you can find a decent opportunity and take heed of all the advice in this article you should be on the way to a successful business life.
About The Author: Naz Daud is the founder of CityLocal Business Franchise Opportunity http://www.citylocal.co.uk http://www.citylocal.co.uk/frontend/franchiseinfo.php?cityid=79 http://www.citylocal.ie http://www.ecademy.com/account.php?id=120141
Please use the HTML version of this article at:
http://www.isnare.com/html.php?aid=149360
*********************** ARTICLE END ***********************
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Message delivered directly to members of the group:
publish-the...@googlegroups.com
*****************************************************************
Please consider this free-reprint article written by:
Naz Daud
*****************************
IMPORTANT - Publication/Reprint Terms
- You have permission to publish this article electronically in free-only publications such as a website or an ezine as long as the bylines are included.
- You are not allowed to use this article for commercial purposes. The article should only be reprinted in a publicly accessible website and not in a members-only commercial site.
- You are not allowed to post/reprint this article in any sites/publications that contains or supports hate, violence, porn and warez or any indecent and illegal sites/publications.
- You are not allowed to use this article in UCE (Unsolicited Commercial Email) or SPAM. This article MUST be distributed in an opt-in email list only.
- If you distribute this article in an ezine or newsletter, we ask that you send a copy of the newsletter or ezine that contains the article to http://www.isnare.com/eta.php?aid=149360
- If you post this article in a website/forum/blog, ALL links MUST be set to hyperlinks and we ask that you send a copy of the URL where the article is posted to http://www.isnare.com/eta.php?aid=149360
- We request that you ask permission from the author if you want to publish this article in print.
The role of iSnare.com is only to distribute this article as part of its Article Distribution feature ( http://www.isnare.com/distribution.php ). iSnare.com does NOT own this article, please respect the author's copyright and this publication/reprint terms. If you do not agree to any of these terms, please do not reprint or publish this article.
*****************************
Article Title: Disadvantages Of A Franchise Business
Author: Naz Daud
Word Count: 756
Article URL: http://www.isnare.com/?aid=149360&ca=Business
Format: 64cpl
Contact The Author: http://www.isnare.com/eta.php?aid=149360
Easy Publish Tool: http://www.isnare.com/html.php?aid=149360
*********************** ARTICLE START ***********************
When you buy a franchise opportunity, you are buying much more than a just a business. A business which stands a higher chance of success compared to people who choose to start a business on their own. You are also buying into a business which has strict control and regulations as to what you can and can not do.
The franchisor will insist on certain quality standards being maintained. This is so that the end consumers receive a high standard product delivered in a way that they are accustomed to at other outlets.
You will be allowed to make small changes in the way you run your business compared to other franchisees, but the business will have to operate to a high standard and all the major decisions on the management of the business have already been taken.
Why is it like this? The franchisor has probably spent many years if not decades creating a business that works and can be sold successfully as a franchise. They have usually invested heavily in marketing materials, advertising campaigns, shop floor layouts logos and branding.
A poor franchisee can have a very detrimental affect on the group as a whole. The press loves it when something goes wrong in business and is quick to spread the news. It is essential for the franchisor to spend some quality time on the poor performing franchisees as the franchise network is as strong as the weakest link.
In return for all this support and ongoing training programmes the franchisee will have to pay a franchise fee at the outset and ongoing license (royalty) fees. These payments can make a huge dent in the profitability of the business so it is essential that you choose a franchise opportunity that not only has high margins but also decent turnover.
In the franchise business a prospective buyer has to tread extremely carefully. Not all franchises are the same. The market place is also evolving very rapidly. What may have worked as a business only a few years ago might not be a viable business opportunity now.
It is imperative that the franchisee takes advice about the current market place before buying into any new franchise. Trade reports are very helpful in this capacity and can be found very easily by a qualified accountant.
A decent franchise agreement is also essential. This should protect the franchisee as well as the franchisor. Too many agreements are biased towards the franchisor and these should be avoided at all costs. If you are not legal speak savvy then it is very important to get advice from a franchise lawyer.
Some franchise businesses which were very successful in the past are now struggling and a few will fold. Make sure that your accountant has a look at the financial reports of the franchise business that you are thinking of buying into. You need a strong franchisor on your side for many years to come.
There are even restrictions in the franchise agreement which cover in detail the processes involved in selling your business. The franchisor has to be satisfied that the buyer will make a suitable candidate for the business. They will charge the franchisee a fixed figure or a percentage of the final price achieved to cover their costs associated with creating new legal agreements, helping with the smooth transfer, doing credit checks on the potential buyer and providing long term support to someone who might not have any experience in managing a business.
What happens when a franchisor rolls out a new product that fails spectacularly? Usually the greatest loss is incurred by the franchise network. It is essential that these products are trialed in certain locations before a nation roll out.
Often the need for profit and the desire for turnover can lead to conflicts between the franchisee and the franchisor. This is usually due to the way royalty payments are calculated in the franchise agreement. In some case the franchisee could be forced into increasing their business even though they are happy with the current turnover and profitability of the business.
There are many other disadvantages to buying a franchise opportunity which I will cover in later articles. In all fairness though, if you can find a decent opportunity and take heed of all the advice in this article you should be on the way to a successful business life.
About The Author: Naz Daud is the founder of CityLocal Business Franchise Opportunity http://www.citylocal.co.uk http://www.citylocal.co.uk/frontend/franchiseinfo.php?cityid=79 http://www.citylocal.ie http://www.ecademy.com/account.php?id=120141
Please use the HTML version of this article at:
http://www.isnare.com/html.php?aid=149360
*********************** ARTICLE END ***********************
- To distribute your articles go to http://www.isnare.com/distribution.php
- For more free-reprint articles go to http://www.isnare.com
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