Franchise Pros and Cons List
In today’s world, billion dollar companies can’t afford to “put all their eggs in one basket”, unless they are forced to. So they tend to sit atop every fence they possibly can. What that means in the world of franchises is that they own some locations and franchise out the rest. Unfortunately for you, the reader, you might have to choose. So I hope this discussion of pros and cons helps.
List of Pros of Franchises
1. Rate of Expansion.
The rapid rate of expansion of a chain of locations by means of franchising as compared to ownership is a definite advantage to franchises. By having the franchisee shoulder the financial burden [not to mention the numerous other burdens], expansion can take place at a much more accelerated rate.
2. Variation in Products Offered.
Usually part of the franchising arrangement is an allowance for leeway in products offered to accommodate the local customers. This allows the company name to be of service to that clientele without violating the rules of the company owned store.
3. Variation in Store Design and Layout of Locations.
Along with leeway in products there is leeway in store design and layout for the same reason, to accommodate the local clientele. And it accomplishes the same result, allowing the company name to be of service to that clientele without violating the rules of the company owned store.
List of Cons of Franchises
1. Lack of Control.
One thing that is a definite drawback to franchises is the lack of control that a company has over what may happen to their reputation. Much damage to a company’s reputation can be done in a very short period of time.
2. Rapid Expansion Without Control Can Spell Disaster.
Rapid expansion combined with the first “con” is an age-old cause of business failure. When a company gives up the tight control over the locations they own and that is multiplied by an ever-expanding factor the likelihood for failure increases also.
3. Variation in Design and Layout of Locations.
Without tight control over leeway in variation in design and layout of locations the quality of the location can become sub-par. This can then affect the reputation of the business in the mind of the consumer. Given the state of the economy today and the depressed areas of cities, it is easy to see how a franchisee would be tempted to “let things slide”.
4. More of a Bad Thing, Is Just a Bad Thing.
If franchising spreads a product’s name, but because of the way it is done that reputation hurts a company, then one is much better off not franchising but instead maintaining ownership of all of one’s locations.
In conclusion, just because there are 4 cons and 3 pros that doesn’t mean franchising is a bad idea, it is something you will have to decide for yourself and your company. For all practical purposes, there are just as many successful companies who have more franchises than company locations as vice-versa.