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Business Franchising Pros and Cons: Weighing up Costs and Benefits

When you decide to run your own business there are usually two options available; either to buy or start an existing business, or choose a franchise model. Both franchising and non-franchising business models offer their own advantages and disadvantages, and what you decide to do will largely depend on your own skills, aptitudes, preferences and budgets. Either way, whether you choose to franchise or not, the same amount of time, energy and persistence is required. This article outlines the pros and cons of franchising versus non-franchising, to help you make an informed decision about your business.

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Financing a Franchise or non-Franchise Business

It often costs less to start your own business than to buy into a franchise, and in the former instance it is possible to start a business on a shoestring budget and succeed. In both franchises and non-franchises capital is needed to buy equipment and stock. However, the cost benefit of franchising is that they often already have a relationship with suppliers and creditors, which may lower supplier costs. Furthermore, when franchising, businesses can often buy in bulk which can greatly reduce the price of stock.

Branding Awareness and Marketing

When you buy a franchise you are buying into a brand with an established identity and a standardised product or service. Although the cost of franchising is usually quite high, the benefit for the cost is that customers will already be familiar with your product or service, and will trust the quality of the brand. For example, a McDonald’s franchising business would not have to build up a reputation from scratch, but would rely on the familiarity of the brand to attract customers.

Franchising, Control and Autonomy over Business Operations

If you prefer to have control over your businesses operations, or enjoy imparting creativity into your business, franchising may not be the correct option for you. When you sign a franchise contract, you are agreeing to follow the rules, regulations and operational systems of the business. The only control you have at a franchise is the work culture you set and who you employ.

Operating System and Procedures

Franchising agreements are often a convenient way to start a business, as you are buying into a tried and tested formulae. You simply have to follow the appropriate operation manual, whether for production, training, ordering or marketing. However, ensuring that you stick to the manual efficiently and keeping up to the standards that your customers expect of the brand, is the difficult part of franchising.

About the Author: Penny Munroe is an avid writer in business related news and tips. Articles include sourcing the ideal Sydney office space to personal branding tips.

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