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The Advantages and Disadvantages of Franchise Ownership

Posted on:

February 9, 2023
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Harper Method Shops may not sound like an international business to most people. However, this is arguably one of the earliest franchise businesses. Today, franchising has become a popular venture for many reasons. It's a great way to own your own business, with a little less risk.


So, what exactly is a franchise? Understanding more about this venture will help you identify worthwhile opportunities as well as how to maximize them. Apart from knowing what it is, let's also briefly delve into the features of franchises and their benefits and downsides.

What Is a Franchise?

A franchise is a system of distributing services or goods. The original distributor or the franchisor is often the initiator of the brand. Regardless of the store or region the product or service is distributed to, the branding–and remains the same.


There are two main forms of franchising. These are:

1. Business format franchises

This is the most common type of franchising today. It involves a business owner granting a license to others to utilize the business idea. Sometimes, this license can be confined to geographical borders. The party granted the operation license is known as the franchisee.


The franchisee trades in the business's products and services under the original company's branding and trademark. The franchisor has control over the products and services and ends up taking a small percentage of the franchisee's revenue in exchange for the brand, tools and processes.

2. Distribution Franchises

This type of franchising varies from the previous entrant. In this type of franchising deal, the franchisor directly provides the franchisee with the products of the trade. The franchisee is required to buy the products from the franchisor. The franchisor, on the other hand, is required to assist the franchisee with aspects like marketing, branding, and advertising.

Advantages and Disadvantages of Franchising

Before choosing to become a franchisee, you should analyze the pros and cons of getting into the business.


The advantages of franchising include the following;

  • Low chance of risk failure since the business has a proven track record
  • You have marketing materials provided by the franchisor at your disposal
  • You receive support from the franchisor, including training, setting up, and running the venture
  • A clearly defined territory that you can service
  • You don't require any specialized training to become a franchisee
  • You can leverage the franchisor's marketing to grow your products or services
  • You'll establish relationships with the already established suppliers
  • Financial institutions may be more willing to lend finance based on the franchisor's reputation

On the flip side, the disadvantages of franchising are:

  • Some franchising agreements include stringent restrictions.
  • A percentage of the revenue trickles back to the franchisor
  • Less overall control of branding


Should You Become a Franchisee?

After understanding the benefits and downsides of franchising, it's easy to see why the business model has remained popular. As mentioned above, some of the leading companies globally and their franchisees have achieved success from franchising.


As a franchisee, you should be adequately prepared when getting into the business. By talking to the franchisor, you'll learn what you need to get started and what to expect. Franchise ownership is for you if you want more control over your venture without necessarily going through all the hoops of growing a successful business.


Moreover, if you want more freedom to balance your life, becoming a franchise owner can help you take the right steps. Unlike a typical job, you can balance your franchise and personal life without neglecting one or the other.


Would you like to know more about franchising? Better yet, are you ready to dive in and become the next Tutor Doctor franchisee? Click here and learn how to get started today!

Tags: entrepreneurship, education franchise, business ownership

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