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A franchise model is a business organization where an individual may start a business that sells goods or services developed by another individual or company. Common franchises include retail outlets, restaurants, cleaning services, and other similar businesses. Franchises allow entrepreneurs to build a business based on the success of a time-tested business model. Starting or owning the franchise model often includes several advantages and disadvantages for entrepreneurs and business owners.
Starting a franchise model often provides entrepreneurs with copious amounts of resources and support from the franchise organization. Franchisors are not interested in giving a franchise model to someone who does not understand the business or cannot make wise decisions. These organizations often create extensive training programs for educating individuals on how to start and maintain a successful franchise.
Franchises also provide the benefit of low-cost economic resources or business inputs. Franchise organizations often use their purchasing power to generate positive business contracts or relationships with suppliers and vendors. These contracts often allow franchise organizations to use each franchise model in their system to purchase resources from one supplier below market prices.
Another important advantage of franchises is the ability for new franchisees to use standard marketing and advertising campaigns developed by the franchisor. These campaigns are often directed at specific target markets or demographic groups interested in the company’s products. While many franchisees may need to contribute some capital for these campaigns, it is often significantly less than the overall cost of creating a new marketing or advertising strategy.
Selecting a franchise model is often based on the popularity of the franchise’s products in the economic market. This popularity saves entrepreneurs and business owners the time and effort needed to educate consumers on how their company’s products meet consumer demand. A franchise’s products may also be more superior when compared to others offered in the economic marketplace.
A disadvantage to owning a franchise model is the inability for entrepreneurs and business owners to use creativity when promoting their business and producing goods or services. Franchise organizations often require franchisees to operate within specific guidelines according to the contractual agreements. Franchisors may also issue fairly specific compliance reviews to ensure each franchise is operating according to standard operating procedures.
Franchises may also include the disadvantage of negative perceptions from consumers in the economic marketplace. Entrepreneurs and business owners must be prepared to deal with these negative situations when buying into the franchise organizations system. Although the individual franchise may operate according to standard outlines and using a strong ethics model, negative perceptions may still affect the individual franchise.