Maybe some of us think to start franchising business rather than build a business from scratch. But do you know the advantages and disadvantages of franchise business (franchise)? there are several advantages and disadvantages of the franchise business.
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1. Advantages Franchise
- Business management has been built
A franchise business has the advantage of doing business under the banner of another business that already has a good reputation. The idea, naming and management of a business has been tested in advance and is ready for implementation on a new location.
- Already known to the public
Marketing franchise business tends to be easier, because the previous business is more prevalent in the community. In other words, the cost and effort needed to build that business reputation is far less than building a new business.
- Easier financial management
Investors tend to prefer to provide capital to a business that has been robust in terms of financial and marketing network. By using the franchise business, the financial management system has been set by the main franchisor, so we do not have to mess around with financial management like building a new business.
- Business cooperation has been established
The person who buys the franchise can benefit from the cooperation that the franchisor has built before. For example cooperation with suppliers of raw materials, advertising and marketing.
- Stronger support and security
Franchisors will usually provide training such as financial management, marketing, advertising and more. Things like this are usually included in the franchise purchase package.
- Can I get bigger profits?
Many people think that the benefits of a franchise business are gaining more profit because the brand has been known to many people. But in fact, this is not always the case. The cost incurred by the franchise buyer to the franchisor must be deducted from the profit earned. Franchise buyers will get a lot of convenience in the early days of the business, but for the long term, franchise owners sometimes find that starting their own business may be much more profitable.
2. Business Franchise Shortage
- Lack of control
One of the disadvantages of a franchise business is the lack of control of the franchise buyer against his own business, as all systems have been determined by the franchisor. So the space for franchise buyers is very limited. Ideas for creativity can sometimes not be applied, because of special agreements.
- Very tied to suppliers
To get a sufficient profit, of course, every entrepreneur wants a small capital. One way is to find a cheap supplier. By using the franchise system, the supplier of goods has been determined. So we can no longer choose a cheaper supplier.
- Reliance on other franchise reputation
One of the biggest shortcomings of the franchise is the franchise reputation depends on the other franchise. If another franchise makes a mistake that leads to a damaged reputation, then this will also affect the franchise that you manage.
- The cost of the franchise
The franchisor will make an initial fee to purchase the franchise agreement. Then advanced costs for training and support for franchise buyers.
- Profit cuts
The franchisees are required to pay royalties from a number of profits earned. If the profit earned is small, then the profit will be deducted to cover this cost.