Franchise
4. Advantages & Disadvantages
Authors: Staff Legal Eagle
Firm / Chambers:
Last updated: 27 Jul 2015
- Whether a franchise is the right choice for you will depend on your personal goals and preferences relating to business ownership.
- The advantages of franchising are generally seen to be:
- pre-established brand identification and reputation to attract a customer base right from the start;
- the availability of established and proven:
- operating procedures;
- manuals; and
- systems;
- access to pre-established:
- financial reporting;
- taxation; and
- compliance systems;
- selection of a site;
- leases;
- building contractors; and
- fit-out;
- some peace of mind knowing that the business model has been in successful operation prior to your commencement;
- access to pre-established and often well researched marketing and advertising assistance; and
- access to pre-existing knowledge about the business such as a network of other franchisees and the ability to communicate with the original business owner or franchisor.
- The disadvantages of franchising are often seen to be:
- less autonomy and independence over some key business decisions;
- the majority of the responsibility and potential liability for any business failures is with the franchisee yet often a comparatively large benefit goes to the franchisor if the business is successful;
- less scope to change and adapt the business to suit your personal needs and financial goals;
- substantial fees or leasing arrangements may be paid to the franchisor;
- heavy terms surrounding termination of the franchise agreement or sale of the business to a new franchisee; and
- less ongoing security as the franchisor is usually not obliged to renew the franchise agreement at the end of the agreed period.
- Often the choice is between:
- starting your own business with a new and individual concept but having to figure out complex matters such as establishing new business models and procedures for yourself; or
- giving up a certain amount of freedom as a trade-off for a pre-established business model and the benefits of 'know-how' from a franchisor's prior experience.
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