Like any business model, franchising has its benefits and drawbacks.
A franchise is basically an individually owned business, operated under guidelines provided by another company known as the franchiser. Tapping the resources of an established organization can reduce investment risk, but at a price. Franchisees must give up a great deal of independence and follow set rules and regulations. In addition, purchasing a franchise can often cost more than starting an independent business.
On the plus side, franchisers will typically help entrepreneurs get financing for franchisees and provide important training programs. So by becoming a franchisee, you can take advantage of an established business with a built-in marketing team and resources.
However, franchisees must give up significant control of their businesses because the franchiser has the final word on how franchises must operate. Additionally, franchisees have to pay an initial franchise fee, which may range from several thousand to several hundred thousand dollars.
Aspiring business owners should consider the many advantages and disadvantages of operating a franchise before making the initial investment. Perhaps taking it slowly by getting involved with someone else with franchising experience or investing in a smaller opportunity might be a good way to start.
Kat Cole, the president of Cinnabon, explains.
