All you need to know about the pros and cons of franchise business in India

Introduction

A business plan for opening a franchise may appear simple to create. After all, opening a franchise entails expanding an already-established brand in a new place with just half the work remaining. On the other hand, an entrepreneur will have to spend a lot of time determining which franchisee business would be the best one to invest in. But investing in an existing brand will take away significant amount of money with the cons of no creativity or additional ideas, less adaptability, less control over the finances.

In the modern economy, franchises are everywhere. Worldwide, there are more than 30 million franchises like restaurants, shops, motels, gas stations, vehicle dealerships, financial institutions, insurance providers, and even airlines are among them.

In order to help you determine if purchasing a franchise is the best option for you, this blog lists the benefits and drawbacks of doing so.

What is franchise business?

A franchisee is a business or organization that has obtained permission from another business to use its brand name. The franchisee (the new business) is given permission by the franchisor (the original business) to sell its goods or services using the franchisor’s brand at different location. The main benefit of acquiring a franchise is that it eliminates the need for a company to worry about developing a brand or acquiring capital for a business because these things are already taken care of by the existing company whose franchise is being acquired.

Pros of franchise business

• Brand popularity

It would take some time to build your product and client base from scratch if you were starting a business from scratch. Franchises, on the other hand, are excellent businesses with built-in prospective customers. If you establish a franchise with this recognizable emblem, people will be familiar with the company, what you provide, and what they can expect. As a result of the popularity, they make more money.

• Less marketing expenses

One of the major benefits of buying a franchise business is that you won’t have to pay any marketing costs as the customers are already familiar with the brand. Companies invest millions of rupees in their branding and marketing, which is why their goods or products sell quickly.

• Being your own boss

One of the most alluring benefits of running a business is being your own boss. When you open a franchise, you may run your own company while still benefiting from the franchise’s expertise. Although running your own business is challenging, you may even choose the work hours.

• Pre-existing customer

One more benefit of the franchise business is that they have a loyal customer base besides a well-known brand. Customers are familiar with the brand because of TV advertisements or travel, even if it is the first franchise site to be built in a small town.

Cons of franchise business

• High cost for setting up

It is true that if a business owner purchases a franchise, he will be able to make significant money right away, but doing so is not always simple. You must provide the brands with a sizable sum of money in order to obtain a franchise. In India, several local and foreign businesses provide a person with a franchise in exchange for millions of rupees.

• No freedom for creativity 

The franchise business already has a brand face or logo or style or manner of doing business, so there is no space for creativity for the person who purchase the franchise business. Due to the business model of any franchise, there are limitations on where you can operate, what you can sell, and the suppliers you can work with.

• Fall in brand value

Corporate scandals, health concerns at a different franchise office, and other events might render franchisees helpless and jeopardize their brand value in the market. As a result, people avoid going to such brands which tend to fall in brand value.

• Control on decision

Even though a franchisor gives a franchisee the opportunity of being your own boss, they still do not have full control over their business and are unable to make decisions without contacting the franchisor. Most franchisees run across the requirement that they abide by the terms of the franchise agreement. A portion of the franchise system and franchisee decisions are under the franchisor’s partial control.

• Less adaptability

You must follow the rules of your licensing agreement after you become a franchisee. Things like the products you sell, the store’s aesthetic design, and the staff’s attire cannot be changed. You have fewer options with a franchise for business expansion and customization.

Conclusion

Many people think of franchising as an easy way to start a business as it has brand value, pre-existing customers, being your own boss or less investment. Still, franchising does not give the guarantee of success, and the same basic management practices apply, such as making well-informed decisions, working hard, managing your time properly, having adequate money, and providing excellent customer service.