Legal Guide

What are the 8 advantages of a Franchise?

by Bhavya Choudhary · 4 min read

advantages of a franchise

If a person is looking to start a business, one needs to ask himself whether he wants to start an independent business or a franchise. A franchise is a right or license granted to an individual or a group to market particular goods in a particular territory. Suppose you wish to open a branch of KFC. You need to get the franchise for the same. To get the franchise, you need to pay the royalty. There are certain advantages of a franchise that one must keep in mind while starting a franchise business.

Advantages of a Franchise

A third-party buyer who purchases the rights of the brand from the franchisor is called the franchisee. A franchisor is an individual or a company who is the owner of the brand. The franchisee pays a royalty to the franchisor in return for using the brand name. 

There are many advantages of a franchise. They are:

Business assistance

Business assistance is one of the advantages of a franchise business. The franchisee gets business assistance from the franchisor depending upon the terms and conditions of the franchise agreement. As per the franchise agreement, the franchisee might get the mode in which the business is to be taken ahead. The franchisor may also provide the equipment, advertising plan, and every other thing that is required to operate the business. This is one of the important advantages of a franchise. 

Brand recognition

One of the most important advantages of a franchise business is that the brand is already a recognized brand and the franchisee only needs to market the brand. There is already a customer base in the case of a franchise business. However, in a startup business, one needs to start from scratch, from advertising to marketing to building the brand name has to be done which takes a lot of time. But in the franchise business, the consumer knows what the business is all about, what it provides, and what they can expect from the business. This is one of the significant advantages of a franchise.

Lower failure rate

A lower failure rate is one of the advantages of a franchise business. Franchise businesses have a lower failure rate than general businesses. A franchise business is already an established brand, and people are already aware of it. The franchisor offers support and advice to the franchisee. Franchise businesses are already brand that has proved themselves over time, and it gives assurance of the product or services. Therefore, it is seen that franchise business has a lower failure rate, and this is one of the vital advantages of a franchise.

Buying power

One of the advantages of a franchise business is the total size of the network. If a person is operating a standalone business and a customer needs to order products or services, the standalone business has to pay more money per item as the order is relatively small. But in a franchise business, the price of goods goes down as people buy in bulk. The brand name can help in having a good relationship with the customer and giving the customers a heavy discount as the overall operation cost of the franchise goes down.

Profits

Early profits are one of the important advantages of a franchise. It is generally seen that franchise businesses earn more profit than standalone businesses. The franchise business is a well-known brand that customers recognize. This high popularity of the franchise business leads to earning more profits than other businesses. Even if the franchisee business costs high royalty initially but it is seen that it gives a high return in the future. This is one of the most significant advantages of a franchise business. 

Lower risk

One of the significant advantages of a franchise is having lower risk than the other businesses. It is often seen that starting any business is very risky. It does not matter whether it is an independent business or a franchise business. However, it is seen that there is less risk comparatively in the franchise business. The reason is that the franchise already has a customer base, and it is a tested and tried business. This gives an edge over other businesses. Franchise business makes it easier to take loans which will help the business to grow. This is one of the most important advantages of a franchise business that gives a motivation to start a franchise business.

Built-in customer base

The toughest part of any new business is to find customers, but in a franchise business, there is already a customer base. The only thing that is required in the franchise business is to pay heavy royalty, and in return for the same, some customers are already familiar with the products. There is no need to spend money advertising the product in a franchise business. This is one of the advantages of a franchise business.

Be your boss

In a franchise business, after paying the royalty, the franchisee becomes his boss. A franchise business gives an added advantage of receiving a franchise’s knowledge base. Owning a business is something everyone dreams of. It makes you your boss without taking the risk of starting a standalone business. Having a personalized schedule and having an option to work from home are the added advantages of a franchise business. These are the advantages of a franchise business.

Conclusion

There are various advantages of a franchise business. But it is important to do research and understand the franchise business before choosing the brand. It is significant to know all the relevant information about the brand. The franchisee must enter into a franchise agreement with the franchisor. Expert legal advice must be taken by the franchisee before signing the contract. 

There are various advantages of a franchise business. Lower risk of loss is one of them. Tap to learn more about the franchise business & its advantages

Bhavya Choudhary

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Bhavya Choudhary

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