How-To Activity 2

What are the advantages and the disadvantages of purchasing an outlet from small
franchise systems?
Some of the advantages of franchising are franchising lowers the danger of a company
failing. The company is built on a tested concept. Before investing, we might research previous
franchises' track records of success. Another one is “products and services will have already
established a market share. Therefore, there will be no need for market testing” (NI Business
Info, 2023). Other advantage is we may employ a well-known brand name or trademark. Any
marketing efforts made by the franchise's owner, or "franchisor," are to our advantage. Also, “the
franchisor gives you support - usually as a complete package including training, help setting up
the business, a manual telling you how to run the business and ongoing advice” (NI Business
Info, 2023). This is great advantage which saves time and money on how to run the business.
Last advantage I will mention is that there is no requirement for prior experience because the
franchisee will receive the necessary training from the franchisor that guarantees to have the
necessary abilities to run the business.
Some of the disadvantages of franchising are that we have the creative freedom to run our
own company, which is not possible if we buy a franchise. Making a distinctive marketing mix
or developing a distinctive brand are not alternatives in this business model because we will
probably have to abide by the organization's current guidelines. Another one is “initial
investments and start-up costs can be expensive” (Needle, 2021). Initial investments may be
substantial, depending on the firm. For instance, the fast-food restaurant business McDonald's
requests a minimum commitment of $500,000 USD in non-borrowed personal assets. This
indicates that they anticipate us to have that much cash on hand, free of loans. This kind of
investment may not be feasible for certain people. Some franchisors may charge rent if we are
purchasing an existing storefront, demand you to handle marketing expenses, pay management
fees, hiring expenses, service fees, royalties, etc., in addition to the initial investment. It can need
a substantial investment, which may be a detriment to individuals just starting out in business.
Suppose that one of your friends is considering purchasing one of the franchises described
here and asks your opinion. What advice would you offer him or her?
I would advise my friend to think about the way of life he will lead while running the
business. Also, look at the operating times. I am sure they do not want to purchase an 80-hour
work week. Another advice is to examine the franchisor's adaptability to new goods, relocation,
and other factors. According to an article, “seeking the advice of a professional franchise
consultant can be an extremely useful method when evaluating if a franchise is the right business
model for you” (Occhiogrosso, 2022). In other words, an expert franchise consultant can help
them choose a brand that fits their lifestyle while also providing opportunity for them to achieve
their business goals. Lastly, I would advise him to have a fixed percentage om royalty fees.
Develop a list of questions that a prospective franchisee should ask the franchisor and
existing franchisees before deciding to invest in the franchises described here.
 “Did you know that you must go through an interview in order to invest in a franchise? If
you want to become a franchisee, your first order of business will be to speak with the
franchisor” (Sweeney, 2018). So having said that, some of the question to ask are:
How long has your company been around?
Why did you decide to open this franchise?
What would you say about your connection to the franchisor?
Do you think the initial training was effective?
What do you think of the marketing initiatives?
Do you know any franchisees that are dissatisfied with their work in this industry? Understand
why?
How challenging is it to hire, develop, and keep employees?
How much could I feasibly anticipate making or losing in the first, second, and third years?
Would you mind telling me how much money you anticipate making this year? How does that
divide up between the goods and services?
How are disagreements resolved?
References
Needle, F. (2021, August 30). 12 Advantages and Disadvantages of Owning Your First
Franchise. https://blog.hubspot.com/sales/franchising-advantage-disadvantage
NI Business Info. (2023). Buy a franchise. https://www.nibusinessinfo.co.uk/content/advantages-
and-disadvantages-franchising
Ochiogrosso, G. (2022, September 26). 10 Key Points To Consider When Purchasing A
Franchise. https://www.forbes.com/sites/garyocchiogrosso/2022/09/26/10-key-points-to-
consider-when-purchasing-a-franchise/?sh=544e23696800
Sweeney, D. (2018, November 18). Important Questions To Ask Before You Buy A Franchise.
https://www.forbes.com/sites/allbusiness/2018/11/18/important-questions-before-buy-
franchise/?sh=17a7b44015e5