To simply answer that question, yes. Franchise business has proven to be profitable. We live in a world where everything has its pros and cons. Similarly, a franchise business also has its pros and cons. Franchise business is when private owners sell the rights of business logo, model, name of huge companies. It usually is an MNC (Multinational Company), that sells its rights to run their franchise in a different location. This is generally done to extend their already profitable business. These private owners are called Franchisees. Relations between sellers and buyers are contractual.
A few popular examples would be, Woodland, Puma, Adidas, Jawed Habib, Rolls and bowls, Tupperware, Dr. Reddy, Sun Pharma, etc. To buy a new franchise there is an initial fee that helps you to buy rights, methods, equipment, marketing techniques that a buyer has to pay. After purchasing these rights the franchisee gets access to trademarked things such as slogan, brands, logos, etc. This purchase is valid for 5-10 years that gets renewed in most cases. However, the franchisee has to pay a royalty to the franchise, this is paid annually (mostly). The franchisee must be aware that they are not buying rights to the product, but a name. Uniforms, methods, and prices are supposed to be the same. Franchise business is basically the same representation but in a different location.
Pros: There is a comparatively very low risk. The business is already successful. Chances of growth are higher than loss. The staff that will work for the franchise are trained with the right technology that has proven to be true in the past. Marketing techniques of the franchise are passed to the franchisee. Marketing systems are crucial for a business, they are essential for any business to succeed. The franchisee gets the already successful marketing strategy such as advertising, business pamphlets etcetera. The Franchise supports the franchisee with technology, innovative methods. They provide a location. Location then gets profit, which benefits both franchise and franchisee. It also helps to deal with problems that the franchise has already dealt with in the recent past.
Cons: The initial cost is expensive. The initial cost to buy most of these successful franchises is no less than lakhs and crores. The ongoing royalty can be 5-12%, they may vary. It’s compulsory for the franchisee to follow the rules set up by franchise. They cannot innovate new apps without the approval of the franchise. They also have to pay for marketing strategies.
To sum it up, buying a franchise is far more effective than starting your own business. With the already successful franchise, chances for your branch to succeed are significantly high. It is a much safer option if you compare it to starting your own business.
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