Franchise Consulting, Development & Brokerage

The Benefits of a Franchise

The Benefits in Owning A Franchise

Should I Buy A Franchise or Simply Start My Own Business?

If the franchise system works, buying a franchise could mean reduced business risk.

If you’re an aspiring business owner you might be weighing the options of buying a franchise vs. opening an independent business.  It’s a great question.  Can you go at it alone? Or do you need the additional training, support as well as a proven franchise system?

When you buy a franchise you’re purchasing a license to operate a business model that someone else has developed.  While there are still risks with a franchise, if the system works, it’s possible you’ll have a higher probability of success as the franchise will have worked through the initial challenges of starting their business.

Additional Costs Associated When You Buy A Franchise

Franchise Fees, Royalty Fees and Advertising Fees

When you buy a franchise, it will cost more than starting your own business.  This is the compensation to the franchisor for developing the business and to cover their costs to further develop the business model.  An overview of the additional costs include:

Franchise Fees – This is a fee you pay for the license, or right to operate another companies business model.  The franchisee fee is not just for the license, but also covers the cost of training for you and your team to learn how to operate the business.

Royalty Fees – Royalty fees are ongoing fees that the franchisee (you) pays to the franchisor. These fees are usually paid monthly and are typically calculated as a percentage of gross sales.

Advertising Fee – This is an ongoing fee that is typically a percentage of your gross sales.  Your advertising fees are typically invested into a fund that is used to help you and other franchisees to advertise your product or service.

Is There Less Risk if I Buy a Franchise?

That depends on the franchise system

When you buy a franchise, the initial and ongoing costs are typically higher than starting your own business. You’re buying the right to operate a business model.  The franchise, royalty and advertising fees are essentially the compensation to the franchisor.  While there is a lot of debate as to whether a franchise system is better than starting a new business from scratch, if you’re confident that the franchise system works, the main benefit could be “reduced risk”.

Please note not all franchise systems work.  It’s important for you to do your research to determine that the franchise model of interest actually works.  Here are some of the benefits of a successful franchise model:

A Proven System – When you buy a franchise system, you’re purchasing a right to operate a business model.  When you start your own business, you will likely face challenges including:

Developing your own system
Developing marketing materials and unique selling points
Identifying the ideal location
Identifying your target market
Delivering your product or service

A good franchise system should already have established procedures in place.  They have developed a system that can be replicated and taught to others.

Brand Recognition – Buying an established brand means instant credibility and awareness with your customers.  It makes it easier to enter a new market, as your customers are already familiar with you.

Purchasing Power – Purchasing power, the ability to use the value of a collective group to negotiate better prices for your inventory. This reduces your costs and increases profit margins.

Ongoing Support – A franchise system provides the benefit of initial training and on-going support. It’s a partnership where all parties have a vested interest in their success.  Having an ally and mentor can help you address the challenges you’ll face as you develop your business.

Should I Buy a Franchise or Start a New Business?

That is all up to you. To Learn more if buying a franchise is right for you click this link

Owning a franchise versus owning an independent business has its benefits.  While the initial capital outlay is higher than starting your own business, the benefits may exceed the costs, particularly given the reasons listed above.  The bottom line is you can be successful with either option.  It’s all a function of your goals and objectives.

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If you’re serious about buying a business and want to learn more about how our franchise consulting and brokerage services can help you please call 866 934 7167 or email us at info@sunshineconsultingltd.com.