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Advantages Of Entering Into A Franchise Agreement

In general, franchises make higher profits than independent companies. Most franchises have recognizable brands that bring customers in droves. This popularity translates into higher gains. Even deductibles, which require a high upfront investment in franchise fees, see a high return. Another important advantage is advertising. For any new business, advertising is essential. Franchisors cover commercial ads and campaigns. Liz doesn`t have to worry about advertising her products. Before committing to a franchise agreement, they must verify the success of the parent company (Kestenbaum, 2008). The main benefits for most franchising companies are capital, growth speed, motivated management and risk reduction — but there are many more.

Franchising as an alternative form of capital acquisition offers some advantages. The main reason most entrepreneurs turn to franchising is that it allows them to grow without the risk of debt or the cost of equity. First, since the franchisee makes available all the capital necessary to open and operate a unit, it allows companies to grow with the resources of others. By using other people`s money, the franchisor can grow largely debt-free. And while you don`t call the federal government, you have to submit it to certain states – and you have to make sure that you comply with the laws of different states. This may be a time-taking process, but can be facilitated by professional advice. You should keep these current fees in mind when deciding whether to create a franchise. As with other forms of legal business, the pros and cons of a franchised business must be balanced and taken into account before starting your new business. The main advantage is clearly safety, but the disadvantage of costs and reduced profits and controls could discourage people. Certainly, the majority of people would choose to start their own business rather than enter into a franchise agreement. This is not to say that the creation of a franchise is not worth thinking about. A franchise has the advantage of operating under the banner of an existing company.


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