2019/07/05(Source: FCオーナーズ運営事務局)
You're probably wondering if joining a franchise is the best option for your independent business venture.
This article from FC Owners will explain the advantages and disadvantages of joining a franchise.
(1) Advantages of Franchising
(2) Disadvantages of Franchising
(1) Advantages of Franchising
■ No Experience Necessary
Many industries require knowledge and experience when starting an independent business. However, with a franchise business, you can start a business in various industries even without experience.
■ Support for Operation and Management
When starting an independent business alone, depending on the industry, you may have to handle everything yourself, from sourcing suppliers and securing sales channels to customer service and advertising. By joining a franchise, you can utilize the franchisor's know-how, allowing for smooth operation and management.
■ Focus on Increasing Sales
By utilizing the franchisor's know-how, management runs smoothly, allowing the owner to focus on increasing daily sales.
■ Brand Effect
The brand effect gained from a franchise business is significant. Simply seeing the brand name immediately conveys the value of the service or product, making customer acquisition easy.
■ Customer Acquisition Effects of Mass Advertising
When starting a business independently, it can be difficult to allocate funds for mass advertising such as TV. However, by joining a franchise, franchisees can benefit from the effects of mass media advertising by the franchisor, including newspapers, magazines, TV, and the internet.
■ Various Cost Reductions Possible
When joining a franchise, the franchisor has already established procurement routes for various items such as goods and equipment. This eliminates the effort of developing new routes, and prices can be expected to be lower than if you were to procure them yourself.
■ Easier Fundraising
Business plans without a track record tend to have low credibility with financial institutions, making it difficult to obtain loans. By joining a franchise, sales can be predicted based on similar past stores and locations, which can increase credibility and make fundraising easier.
■ Lower Startup Costs
Depending on the industry, some franchisors will cover the costs of store equipment and other initial expenses. In such cases, it can be millions of yen cheaper than setting up a store independently.
(2) Disadvantages of Franchising
■ Adherence to Headquarters' Manuals and Restrictions
When opening a business as a franchisee, you must follow the headquarters' manual. Creating your own menu or developing your own advertising is generally prohibited, resulting in limited freedom.
■ Royalty Payments
If the brand has a royalty system, you will be required to pay royalties when you join the franchise. The payment amount may vary depending on the royalty system, but generally, payments are required even when the business is not performing well.
■ Difficulty in Relocating
If you operate independently, you can relocate your store. However, since a franchise business is a contract, you cannot relocate at the owner's discretion. You should be mindful of selecting the optimal location and property in consultation with the headquarters.
■ Prohibition of Opening a Competitive Business (After Contract Termination)
Many franchise headquarters prohibit opening a competing business for several years after the contract period ends. Be sure to check this before joining.
■ The Counterproductive Effect of Branding
If staff from another store cause problems and are picked up on TV news or online, your franchise will suffer reputational damage. This is the counterproductive effect of brand recognition, and the stronger the brand, the greater the impact.
As described above, there are various advantages and disadvantages to joining a franchise. Whether a franchise system is useful depends on your desired image of independence. Consider why you want to become independent and what you want to do with that independence, and make the best choice.
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