Risks & Reward of Franchising

"There are several very good reasons to pursue a franchise as a first time entrepreneur.

First, most franchises have a business model already in place that has been tested and refined...Second, the systems should be well established and ready to go...Third, a franchisor should be able to provide significant help in marketing...Fourth,...a franchise eliminates the need to come up with an original, creative business opportunity...

With all of these advantages, there are several sobering disadvantages of franchising...Beyond the contractual issues that arise in franchising...over time, many franchisors realize that they can be just if not more effective on their own without paying the monthly percentage of sales to the franchisor...These on-going fees can eat away at profit margins if there is not real value added in what the franchisor provides.

Another concern expressed by franchisees is that with all of the rules and standardized procedures, they tend to feel more like an employee than a business owner...A financial risk to consider is that many first time entrepreneurs can only afford newer franchised concepts..All franchise opportunities are not created equal."

Read more in this excellent article from the Entrepreneurial Mind.

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