There are many advantages to investing in a franchise, and there are also drawbacks. Widely recognized benefits to buying a franchise include a ready-made business operation. A franchise comes with a built-in business formula including products, services, even employee uniforms and well-established brand recognition such as that of McDonald’s. Depending on the franchise, the franchisor company may offer support in training and financial planning, or even with approved suppliers. Whether this is a formula for success is no guarantee.
Disadvantages include heavy start-up costs as well as ongoing royalty costs. To take the McDonald’s example further, the estimated total amount of money it costs to start a McDonald’s franchise ranges from $500,000 to $1.6 million. Franchises, by definition, have ongoing costs to the franchiser company in the form of a percentage of sales or revenue. This percentage can range from 4 – 8%. Other disadvantages include lack of territory control or creativity with your own business, as well as a notable dearth of financing options from the franchiser. Other factors that affect all businesses, such as poor location or management, are also possibilities.
Read more: Franchise Definition | Investopedia http://www.investopedia.com/terms/f/franchise.asp#ixzz3zO4YCcrl
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