What is Franchising and Why Buy a Franchise?
Franchising is the strategic alliance between a franchisor and a franchisee. Franchising is a way of starting a business while using the tried and tested methods of another company. Basically, you pay the company for the exclusive right to sell its products or services in a particular geographical region.
There are two parties or entities involved in a franchise agreement – franchisor and franchisee.
The franchisor is the party or entity that allows you to use its brand name, logos, technology, etc for a certain period of time while as you would have to agree to run the franchise according to the company standards. Franchisee, in contrast, is an individual or entity that is allowed by the franchisor to use its trademark, products, etc for an agreed amount of fee. The goal of both that is franchisor and franchisee is to dominate the target market.
For example, Kidzee, which is one of the popular preschool chains in Asia is the franchisor that grants individuals the right to operate its preschools for a certain amount of money and assets. In simple words, a franchise invests his assets such as land, building, etc money, and other resources for acquiring and operating a Kidzee franchise.
A franchise is nothing but a privilege officially granted to do business under explicit guidelines at a particular location for a declared time period.
A franchise agreement that we mention above a while ago is the legally approved document that governs the relationship between a franchisor and franchisee for a specified period of time. Hence, in conclusion, what you need to note is that a franchise gets the licensed privilege to do business by the franchisor or franchise provider.
6 Reasons why should Buy a franchise
Here are six reasons why you should buy a franchise over starting your own from scratch.
1. No advertising needed
While opening a franchise, you don’t have to be worried about spending the budget on raising awareness in the market. The reason is that your parent company is already a well-known brand, meaning customers already know what to expect and so they will come to you naturally.
That is not the case regarding the business you start on your own. There is no alternative to escape from the costs required for spreading awareness about the products or services your firm produces because no one of your customers has learned about them yet.
2. Easily gain funding
You, as said earlier, benefit from the tried and tested methods under the security blanket of a well-established brand name that itself can help you gain funding when you think of any major improvements to your business.
3. Ongoing support
Once you become a franchisee of any particular brand, the franchiser becomes obligatory to protect and build its brand name. You also will be offered ongoing help and support so that you are able to find new customers and retain existing ones.
4. Financial help
You could also gain financial help in getting your business off the ground as many franchise providers tend to aid prospective franchisees with startup costs, equipment, and advertising.
5. You also have the benefit of being located in the prime spots of the high street. Franchisers have specifications of where they would like their franchises located and so choose said locations carefully to ensure the largest amount of custom and usually can afford most of the time, prime spots in high streets and shopping centers.
6. You are more likely to get funding from banks than if you were starting out on your own. As your parent company has a well-known brand name, the increased security and reliability this lends will mean that you can get substantial amounts from banks to cover your start-up costs.