What is a Franchise Business

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Franchise is a form of business or business cooperation using the principle of partnership, an established company both in terms of management system, financial and marketing and the existence of a brand of company products that are well known by the public, with companies or individuals who use the brand of the product or the system is what is called a franchise.

Maybe some of us think to start franchise business rather than build a business from scratch. But do you know the advantages and disadvantages of the franchise business (franchise)? There are several advantages and disadvantages of the franchise business

Advantages Franchising

1. Business Management has been Built

A franchise business has the advantage of doing business under the banner of another business that already has a good reputation. The idea, naming and management of a business has been tested in advance and is ready for implementation on a new location.

2. Already known to the Public

Marketing franchise business tends to be easier, because the previous business is more preceded in the community. In other words, the cost and effort needed to build that business reputation is far less than building a new business.

3. Easier Financial Management

Investors tend to prefer to provide capital to a business that has been robust in terms of financial and marketing network. By using a franchise business, the financial management system has been set by the main Franchise,  so we do not have to mess around with financial management like building a new business.

3. Business Cooperation has been Established

The person who buys a franchise can benefit from the cooperation that the Franchise has built before. For example cooperation with suppliers of raw materials, advertising and marketing.

4. Stronger Support and Security

Franchise advertising and more. Things like this are usually included in the franchise purchase package.

5. Can get Bigger Profit

Many people think that the benefits of a franchise business are gaining more profit because the brand has been known to many people. But in reality, this is not always the case. The cost incurred by the franchise buyer to the franchise, must be deducted from the profit earned. Franchise buyers will get a lot of convenience in the early days of the business, but for the long term, franchise owners sometimes find that starting their own business may be much more profitable.

Business Franchise Shortage

1. Lack of Control

One of the disadvantages of a franchise business is the lack of control of the franchise buyer against his own business, as all systems have been determined by the franchise. So the space for franchise buyers is very limited. Ideas for creativity can sometimes not be applied, because of special agreements.

2. Very Tied to the Supplier

To get a sufficient profit, of course, every entrepreneur wants a small capital. One way is to find a cheap supplier. By using the franchise system, the supplier of goods has been determined. So we can no longer choose a cheaper supplier.

3. Reliance on other Franchise Reputation

One of the biggest shortcomings of the franchise is the franchise reputation depends on the other franchise. If another franchise makes a mistake that leads to a damaged reputation, then this will also affect the franchise that you manage.

The Cost of the Franchise

The franchise.will make an initial fee to purchase the franchise agreement. Then advanced costs for training and support for franchise buyers.

5. Profit Cuts

The franchise purchaser is required to pay royalties from the amount of profit earned. If the profit earned is small, then the profit will be deducted to cover this cost.