Advantages and disadvantages of franchising your business

Franchising offers many advantages as a method of expanding your business, but you must also consider the disadvantages of this business model.

Advantages of franchising your business

  • A franchise network requires far less staff than a similar sized network of corporately owned outlets.
  • Franchising benefits from the investment of others (the franchisees) to help grow the business - making expansion much more cost effective.
  • A fee will be paid by the franchisee both at the start and ongoing.
  • Once the right systems are in place, a business can expand at an impressive rate – limited only by the ability to recruit, train and support franchisees.
  • The business is likely to become much more robust as it is underpinned by determined franchisees.
  • A franchise network can start to benefit from bulk buying and other cost and operational efficiencies.

Disadvantages of franchising your business

  • The business is reliant on the right systems being put in place to protect the brand, the franchisor and the rest of the network.
  • There is still a significant investment to make in ensuring the right advice is taken, documentation produced and systems put in place, before you start.
  • The franchisee pays you an ongoing management fee, but they take the rest of the revenue earned from their efforts.
  • Franchising a bad business will just provide a bigger bad business.
  • You cannot franchise an idea – you have to have operated and proven the system first.

Find out about the key steps to take in franchising your business.

    Oscar Pet Foods - Franchisee case study

    Matthew Smith came to OSCAR as a complete novice with intentions of only wanting to be self-employed following graduation from university. He found franchising to have the perfect balance for his circumstances.

    Read the full case study
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