April 29, 2010

Quick Look at Franchises

Little while ago I ran across this article Most Popular Franchises. Its an interesting piece and talks about the popular franchises and gives some financial data on their franchise fee rates and the default rates.   It got me thinking about opening a franchises as a business.

I've often thought a franchise might be a good way to start up a business.   A franchise has some strong pluses.   Just off the top of my head : There is an established national brand name.   The franchise company will help you with training and developed processes.   Basically someone else has already made the business as a whole successful and your part is simply running a new location for the business and sharing the profits from doing so.   I like the franchise model in a lot of ways.  

The down sides of a franchise are there as well though.  You have to pay someone else a fee to start the business.   You have to run the business according to their rules and policies.  The franchise may be required to buy supplies from the company only and pay relatively higher prices for them.

There is a ton of information on franchises on the Entrepreneur magazine website.   They have a whole section related to franchisees.

In 10 reasons to buy a franchise  they talk about the franchise business being a proven formula, giving better access to financing from the franchisor and SBA and having higher rates of success.

They also have articles with the pros of franchises and the cons of franchises.  For the pros they list collective buying power, sales and marketing assistance and national and local advertising.   For the cons they talk about things like loss of control, being locked into a contract and extra costs.

I think another good starting point would be the article Are you suited to be a Franchisee?

I've only just touched on the topic of franchises here and there is a lot more information out there.

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