What is a franchise in business and how to get one?

Starting your own business with a franchise is much easier than doing it yourself. How to do everything right and what must be done, we will figure it out in our article.

Nowadays, the concept of a franchise is quickly and reasonably gaining popularity. Starting your own business with the purchase of a franchise provides a significant breakthrough, with which the business can go up very quickly. But for many aspiring entrepreneurs, this word is still completely incomprehensible, so let's take a closer look at its meaning, advantages and disadvantages.

What is a business franchise?

A franchise is the right to open your own business under the auspices of a well-known trading company, with the condition that technologies and procedures are preserved. Of course, such a right is paid, and you need to purchase it before using it.

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This method of promotion is the most effective, and according to statistics, it allows you to reduce the promotion process by as much as 5 years! At the same time, the owner receives additional advertising, and as a result, additional customer attraction with the help of a well-known brand.

Unfortunately, according to experts, half of the companies that have just appeared cannot compete with business sharks, and are liquidated on their own during the first 2 years. Using a franchise reduces this percentage significantly because you don't have to start all over from the beginning. You already have a well-established name with a positive reputation, which in itself will attract a certain customer base.

In fact, a franchise in business is a working scheme that is guaranteed to make a profit. By purchasing it, you will undoubtedly begin to receive the first profit already at the initial stage.

There are such main types of franchises that bring maximum income:

In fact, this list is much wider, we have listed only the most profitable options in our opinion, subject to a minimum start-up capital. If you do not have enough money to buy a franchise right away, there is the possibility of lending and paying its cost in installments.

How is the franchise paid?

There are two main ways in which you can pay for the purchase of a franchise to start your own business: a lump-sum fee and royalties.

A lump-sum fee is a one-time transfer of money to the account of the franchise owner, which occurs at the time of signing the contract. This method is most often used by small companies and corporations that do not have the desire to control your income and the development of your business. When signing the contract, the company must transfer to you the rights to use the name of the company, its methods of work and technology.

Royalty is a periodic payment for services for using a franchise. This payment method is more often used by large corporations or companies.

Advantages of franchising

Like any other type of activity, the franchise has its strengths and weaknesses. Only after studying them, you can make a really thoughtful and balanced decision.

Franchise Benefits:

• Using a well-known name. You do not need to waste time promoting your own name. Under the contract, you get a name that everyone already knows, which has proven itself well.
• Quick financial gain. You will receive excellent revenue already on the first day of the institution's operation.
• New knowledge and support in doing business. You do not need to spend a lot of time learning all the basics and little things. Often the franchisor himself is interested in the speedy development of your business. Therefore, courses and training programs are often created in order to quickly dedicate you to the essence of the matter and make your business as profitable as possible. In addition, in any difficult situation, you can seek the help of lawyers or consultants.
• The cost of promotion and advertising is minimal. You will most likely be provided with recommendations for promotions.
• The risk that the case will burn out is minimal. Of course, there is one, but when using a franchise for a young businessman, all conditions are created for him to start earning from the first day of work.

Downsides of franchising

Despite such an extensive list of positives, the franchise also has negative ones. These include:

• Clear coordination of actions. After signing the documents, your actions must fully comply with the rules of activity and corporate ethics of the company with which the contract was concluded. There is practically no room for maneuver and manifestation of one's own ambitions or character.
• According to the terms of the contract, you can purchase equipment and consumables that you need to work only from your business partner, without having the right to choose.
• Psychological pressure from the franchisor. Most often, documents are drawn up in such a way that the brand owner gets the maximum profit, and you work for days on end. But this is only necessary so that the business develops as quickly as possible and begins to bring maximum profit.
• Expensiveness of some franchises. But here you are free to choose what you can afford.

As you can see for yourself, there are far more positives than negatives. And if you think about it, then some of the minuses can also be translated into the category of pluses.

To study our material with the calculations given in it according to the business plan.

How can a beginner choose and start a franchise business?

There are many young people in our country with great ambitions, desires and opportunities to start their own business based on a franchise. But there are a lot of pitfalls along the way. To avoid unpleasant situations, we recommend that you listen to these tips:

• Read the contract carefully from start to finish. Remember, the most interesting moments are written in small print. Feel free to ask questions about any points you don't understand.
• Before concluding a contract, try to find as much information as possible about the franchisor.
• Remember, if a partner is really interested in working with you, he will not hide the level of earnings, plans, connections and subsidiaries that are already working under his leadership.
• The contract can describe things that are absolutely strange at first glance. For example, the cashier must necessarily make a certain gesture before serving the client, or the tables must be wiped in a strictly defined order.
• Be prepared that all terms of the contract will be regularly checked, and non-compliance will be punished with a fine.

The number of franchise companies in our country has doubled over the past few years, which clearly shows that there is still a significant benefit from this process.

After signing the documents, you will be given a clear sequence of actions that you must strictly adhere to.

As for the choice of the direction of business, here you need to consider several aspects:

• The amount of money that you can invest in your own business at the initial stage.
• The relevance of the direction in your city. You have to soundly assess the profitability of the business. For example, if there are already more than 5 fast food establishments in a small town, then most likely the opening of the sixth one will not bring the expected profit.
• Consider your own desires. You are likely to devote a large amount of time to this business for many years, and perhaps for the rest of your life, so choose a business that suits you.

What investments are needed to open such a business?

It is very important at the initial stage, when the idea of ​​​​opening your own franchise business, was just born, to calculate its approximate cost before you start making the first profit.

Remember, investments are needed not only for buying a franchise, but also for:

• Equipment that will be used in the production of a product or in the service of people.
• Registration of normative documentation.
• Acquisition of premises, or its removal. May need to be repaired.
• The first purchase of products or materials.
• Employee salaries.
• Promotion and implementation of various promotions.

Often, after making such calculations, people realize that they themselves will not be able to pull such a business, then they begin to look for partners.

Also, don't forget that you must have a supply of money or additional income that will allow you and your family to live until the moment when the business begins to bring money.

Drawing a conclusion from everything written above, we can say with confidence that starting your own franchise business is not at all difficult. At the same time, it will give you a great boost to get started and earn your first income. There are certain risks of burnout, but their percentage is much lower than that of those who open their own business on their own, without outside help.

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