What are the upsides and downsides of franchising?

Franchising is a prosperous system that has many benefits. Some of them are: 

  • Ready-made business plan: franchisors have rich experience and are less likely to undertake any mistakes regarding business development. As a franchisee, you acquire a well-proven business model.
  • Brand: an ability to use a popular trademark familiar in certain circles will significantly speed up entry into a wide market and reduce costs to a minimum.
  • Training: franchisors provide working training that helps entrepreneurs to work in the preferred line of business without having prior experience in the field. 
  • Location: franchisors actively take part in selecting the best territory to ensure good sales. 
  • Assistance with staff recruitment: many franchisors have recruitment programs that can help you fill your establishment with necessary staff. 
  • Protection from competition: a franchise often gives the exclusive entitlement to a franchisee to run an enterprise in a specific area. Therefore, there will be no overabundance of supply.

However, there are also downsides to having a franchise. Consider the following before taking on this venture: 

  • Lump-sum fee. Its sum can be rather big. The size of the lump-sum fee differs depending on the franchisor and scale of business. 
  • Royalty. The average royalty fee is 6.5%. If the franchise requests fixed charges that don’t depend on actual sales, this can be rather high-risk.
  • Restrictions. Franchisees have to abide by some rules and standards set by a franchisor.