What is Franchising?  The Pros and Cons

Buying a franchise is like a marriage or ongoing relationship between two parties involving the right to products, services, trademarks and business concepts. Franchising is a form of licence by which the owner (Franchisor) of a product or service obtains distribution through affiliated dealers (Franchisees) and the holder of this right usually is given exclusive access over a defined geographical area.

Franchising is not a product but rather a method of marketing goods and services where the franchisor remains in control over the look and feel of the franchise business.

As with any business, there are pros and cons, which include:

Advantages:

  • Name recognition / branding;
  • Standardisation (customers see the same across all franchises – design, products and services);
  • History/Track record;
  • Continuing assistance;
  • Supplier relationships (often discounts and rebates);
  • Independence (own boss);
  • Proven concept that is working;
  • Systems to support small business.

Disadvantages

  • Risks (not all franchisors have a proven track record and there are good and bad locations within the franchise network);
  • Changing franchise trends or fads;
  • Competition – easy to compete at lower costs;
  • Not flexible to sell other products;
  • Paying royalties;
  • What are you buying;
  • Forced to buy through “approved suppliers” which can be more expensive.

Franchise law is quite complex and a highly specialised legal area. For this reason, always seek the advice of an experienced Franchise lawyer, such as David Newhouse

Read more about Franchising:

  1. What is Franchising? The Pros and Cons
  2. Doing Your Homework
  3. Why do you need a Lawyer?
  4. Franchising Agreements & The Code
  5. Breaches, Termination and Disputes

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