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April 11, 2018 Starting Up en_MY Weigh the pros and cons of opening a franchise. Review the benefits of using a well known brand to draw customers through your doors, but also look at the potential disadvantages of this business model. Decide if a franchise is right for your new business and discover how QuickBooks can help with the process. https://quickbooks.intuit.com/cas/dam/IMAGE/A5lHVUkkS/6ce14cc37fae651bb11e4c8621ba0746.jpg https://quickbooks.intuit.com/my/r/starting-up/pros-cons-opening-franchise Pros and Cons of Opening a Franchise
Starting Up

Pros and Cons of Opening a Franchise

Staff Writer April 11, 2018

What if, instead of building a business from the ground up, you could tap into a ready-made business model with a record of success? That’s the promise of a franchise. If you’re thinking about opening a business, you might take a moment to consider the pros and cons of this turnkey business model.

What Is a Franchise?

A popular business model worldwide, a franchise consists of a franchisor and franchisee. As the business owner, you’re the franchisee, and you pay the franchisor to use their name and logo. Typically, the franchisor provides you with the brand name, the products, the business model, and various other elements. In return for that, you pay a start up fee as well as continuing fees or royalties. Basically, when you open a franchise, you run and own a branch of a large corporation.

What Are the Advantages of a Franchise?

The main benefit of a franchise is that you get to fly a successful company’s banner over your shop. Your business profits from the franchisor’s marketing and branding efforts. When people see a brand they know and love, they’re more likely to stop and patronize your business. For instance, when customers see a PappaRich, a Hot Roll, or a Marrybrown sign, they know exactly what to expect in these locations. In contrast, if they see an independently owned restaurant, they don’t know what’s behind the front doors.

But, franchises aren’t just restaurants. Smart Reader Kids offers childhood education programs, Vincci sells women’s shoes, SenHong focuses on electronics, and dozens of other franchises sell other products and services. The variety of franchises available makes it easy to choose the type of business you’d like to run.

Are There Any Disadvantages to Owning a Franchise?

As a franchisee, you have to follow the franchisor’s rules, which reduces the creativity you can inject in your business. Also, if other location or if the franchise as a whole takes a downward turn, that’s likely to have a negative impact on your business. When you run a truly independent company, you only have to worry about your business. You don’t have to worry about potential issues with a parent company.

How Do You Start a Franchise?

To start a franchise, you have to pay a start-up fee and make a capital investment. The investment varies depending on the type of franchise you plan to own. For instance, if you’re opening a large restaurant, you may need to lease space, buy kitchen equipment, purchase food and pay for a variety of other essentials. In contrast, franchises such as Crazy Potato and Nelson’s have relatively low capital investments ranging from RM 15,000 to 60,000. That’s because you don’t need much space or equipment to run these popular snack shops.

While running a franchise, you face similar challenges as any other business owner. You need to recruit talent and manage employees. You also have to keep an eye on cash flow and handle your accounting. Ultimately, whether you decide to open a franchise or an independent business, QuickBooks can help you keep track of your growth.