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Nov, 01 2007

Franchise or self-owned

To choose between franchising or self-owned business opportunities, prudence and wits is important. If you have a true entrepreneurial spirit and want to be consistent in your business, then franchising is the best option. If you want action and do things

Taking on a franchise is an opportunity worth considering for anyone who wants to run a business but does not have a specific business idea, or prefers the security provided by an established concept. The right kind of franchise is the basic need for a head start and the best part about the venture is that you would be taking up an already established business rather than setting up a business from scratch. Successful franchises have a much lower failure rate than completely new businesses. But it is not all plain sailing. Every concept has its pros and cons.

Any business opportunity should be taken up only when an extensive research has been done about the whole concept and detailed knowledge has been acquired. If anytime, you plan to enter into a business venture, you will generally have two opportunities to choose from:

• You can start-up with your own business, where you would be the boss but will have to start from the scratch.

• You can become a franchisee and instead of starting from scratch will have an already established brand name or trademark.

Taking up a franchise can be a quick and easy way to set up one’s own business without starting from the scrape. To have a look at both sides of the coin is advisable, as many people might consider owning and managing their own business to be a better option. Franchising business may or may not be for each one of us, to accept it or to put it down is a difficult question to decide on. Comparisons between the pros and cons of franchising business can help in taking up a decision to a great level.

The most luring benefit, which attracts an investor to the franchising world, is the speed of expansion as the investor will take over an already developed brand image. Being a franchisee means that you are entitled to enjoy discounts on supplies and raw material required for the business operations as the raw material is bought in bulk by the franchise networks. This buying in bulk makes room for greater discounts among franchisees, and when supplies and raw material are cheaper it becomes easier to compete with other establishments. An opportunity for higher profits prevails since the return on investment is higher as compared to the return on revenue. This means that the percentage of pure profit is higher.

Franchisees within a network are able to offer knowledge based on their experiences in the field. Such knowledge cannot be obtained from the business schools and getting connected with experienced franchisees can help in getting business opportunities abroad.

The flip side of the issue reveals that the costs in the franchising business may turn out to be higher than one expects. The franchising agreement usually includes restrictions on ways to run the business; because of them you might not be able to make changes to suit the local market. Since you are among different other franchisees that have taken up the franchise of a particular company, bad reputation for the brand may be brought about by one franchisee’s mistake which may result in losses that all have to bear.

It is palpable for any business opportunity to have its good and bad points, but to decide between two different opportunities depends upon an individual. Self-owned business, no doubt, will give you 100 per cent control but you will be starting from actually nothing. However, in franchise business opportunity the control lies with the franchisor but you will be taking over an already established brand. As a franchisee you will not be making the key decisions but the expansion and growth would be far beyond as compared to self-owned business.

The ultimate decision lies with self, an individual knows himself better. Only what is required before deciding among business opportunities is to have complete detailed knowledge about each and every aspect.

BOX ITEM

Pointers for entrepreneurs

• Make it a point to attend workshops and seminars before considering a business opportunity

• Gather enough information regarding the business you would like to franchise

• Beforehand, comparison of the franchise business opportunity to the self-started business opportunity is advisable

• Beware of scams and of pitfalls and challenges that may be encountered in the process

• Carefully choose which business to franchise and a research on the stability of a certain company is recommended

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