Last updated Jul 29, 2024 and written by Tom Richardson

Franchising: A Tried and Tested Business Model

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In all sectors, the three main challenges facing any start-up are

  1. identifying a gap in the market,
  2. developing the product or service
  3. and establishing a price point.

Consequently, when deciding to form a company, many entrepreneurs choose to buy a franchise. Franchising  has many advantages and disadvantages:

Advantages

  • Start–up Costs – All the associated costs of forming a company like market research, business launch and marketing, are already incurred. The value of all of these will have a positive impact your new business.
  • Customer Base –With a franchise, you will get access to demographic information. Additionally, the product or service will have already been demonstrated to work and the business should already have an existing client base.
  • Planning and Strategy – An existing franchise should already have some sort of an established business plan and strategy in place. You’ll be able to use this information to inform your own planning and strategy.
  • Finance – Raising finance will be easier. Also, often, a franchise comes with financial support.
  • Experience – Franchises have history.You can learn a learn from that what to do and how to do it right or what not to do.

Disadvantages

  • Finance –  The rights to a franchise can be expensive and a large incremental investment will probably be required upfront.
  • Research –  Researching what franchise to buy requires a lot of in depth research which can take a lot of time.
  • Inheritance – Many people begin the company formation process from scratch’. Buying an established business, you will inherit the result of previous strategy, practice and potentially even a workforce you did not recruit.