SAUMU JUMANNE:
To venture into business it’s a
basic requirement to decide on which type of ownership to adopt. Purchasing a
franchise is one of the several avenues to becoming an entrepreneur.
A franchise is basically a legal
agreement that gives an individual the right to market a company’s product or
services in a particular geographical area. A person who purchases a franchise
agreement is known as a franchisee while the person or company that offers it
for purchase is referred to as a franchisor.
Franchising opportunities are available
almost in every field. You only need to arm yourself with adequate information
from business related newspapers like Business Times, business magazines, radios
and television.
If you want to become an
entrepreneur by owning a franchise, you will have to consider operation costs
associated with this type of business ownership.
Among these is the initial non
refundable franchise fee and start up costs such as rent. You will also need to
pay royalty fees, that is, a percentage of your franchise’s income; monthly or
weekly will be made to the seller of the franchise.
In addition, you will have to pay
advertising fee to support advertisements made in the television, newspapers
and other media for the franchise as a whole.
There are, however, many
advantages of purchasing a franchise. First, the franchisors offer management,
technical and other related assistance. This could be in terms of onsite
training on how to handle daily operations. Some franchisors even help in
determining the design of the business, choice of the buildings and equipment
purchase.
In addition, an entrepreneur is
provided with an established product or service. This makes the buyer of such a
franchise to find an easy landing in business.
The cost of acquisition of equipment
and other supplies can be reduced. This is because franchises are part of large
chains able to purchase in huge quantities.
Guarantee of consistency also attracts
customers. This is because a franchise contract mandates a certain level of
quality, thus consumers know that they can walk into a franchise anywhere in
the country and receive the same product or service.
Although
franchise sounds like a great idea, there are several setbacks that one should
look out for. For instance, one has less freedom in decision making
compared to other types of businesses.
This is because many decisions have already been made for franchisees.
Remember, a franchisee must offer only certain products or services, and they
must charge prices set by the franchisor.
Buying a franchise
can also be very expensive and this definitely affects someone’s operating
capital. Moreover, some of the profits earned are given to the franchisor as
royalty fees.
The other
disadvantage is that the franchisor can terminate the franchise agreement. This
mostly occurs when a franchisee fails to pay royalty payments or to meet other
conditions. This means that investment in the franchise can easily be lost. In
addition, when the franchise expires, the franchisor might refuse to renew the
agreement.
Franchisees are
dependent on the performance of others in the chain. One can therefore easily benefit
from the success of other franchisees. On the other hand, if the other
franchisees run sloppy operations, customer opinions of the chain will decline
and buyers might avoid the business, affecting even those who maintain high
standards in their service delivery.