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Why or When is Franchising a Bad Idea for a Start-up Business?

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Franchising has its benefits, that much is clear to see – you can in essence hit the ground running, you can receive a substantial amount of training in an industry from wiser heads than yours and you can leverage the power of a large brand to encourage consumer loyalty and trust. However, franchising isn’t always the best option – sometimes it’s better to pluck up the courage and just go it alone.

Start-Up Costs: Franchises aren’t cheap – at least the best franchises, the real business opportunities, aren’t cheap. In some instances you can expect to pay anything between £10,000 and £500,000 to start a franchise and ultimately, your business will be in significant debt before you even begin (providing you do not have the capital to invest in the business and have to take a loan from a financial institution).

This, in a lot of instances, is a bad move for a business – that money could essentially be spent on a marketing budget for your own business, under your own brand. What’s more, it could potentially be used very successfully, too.

Control: It’s a bit of a bad word, and it has negative connotations, but the basics of human instinct determine that we all like to be in control – while a franchise will still give you control over the future and direction of your own business, it’s far less than you would be granted with your own start-up and your own Company.

This can be a negative or a positive, depending on how you choose to look at the situation – however, when it comes to making the decision you want to make for your own business, you may find a franchise too restrictive.

On-going costs: Most franchisors will demand on-going costs merely for the privilege of training, support and the utilisation of their brand name – in a lot of instances, these costs can be prohibitive, depending on a person’s circumstances. For example, you may have to provide a 5-10% fee to the franchisor on a monthly basis to cover group marketing and advertising costs. While this can result in more business for you, it’s still not money being invested solely in your business.

On top of this, it’s quite likely the franchisor will take a portion of all your monthly earnings too.

Feasibility: Would it not just be easier for you to go it alone? The real question for a lot of franchisees is simply what the franchisor can do for their business that they ultimately can’t do themselves – sure, you are able to leverage a larger brand, but are you so ill-equipped in terms of knowledge that you couldn’t build a brand up for yourself?

Franchising is a very popular option for a lot of people, but it’s important to remember it’s not suitable for ALL people – take a look at the various franchisee options in your local area and ultimately always ask the right questions: is this something I couldn’t achieve on my own with the budget I’m investing in the franchise? If the answer is no, then franchising will probably be the best option for you.

Are you looking for more information on franchises or businesses for sale? Visit FranchiseOpportunities.org.uk now for more information.

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