The franchisee agrees to pay the franchisor a certain sum of money for use of the business name or method of doing business or both, usually in the form of an initial fee and some agreed percentage of sales or similar.



The main advantage of starting a business by becoming a franchisee is that you are usually buying a tried and tested method for doing a particular business. Consequently, there should be a greater chance of success than with buying an existing business or starting from scratch.

The franchisor will dictate to certain degrees how the business should be run. Often this will include instructing and advising the franchisee on the product or service range, pricing policy, size and design of premises and sometimes even the style of uniform the employees should wear.

A good franchisor will also provide a back-up service giving advice where applicable on such aspects as management, training, merchandising, accounts, etc. Larger franchisors will usually offer advertising and sales promotion support.

The size of franchise businesses varies considerably. The initial cost of buying a franchise ranges from a few thousand upwards to half a million pounds. Franchising has not become so popular that most of the major clearing banks have set up specialist section to deal with finance applications from potential franchisees.

The main disadvantages of becoming a franchisee is that the business is never truly yours. As the franchisor lays down certain requirements which can be quite comprehensive, you can never run the business exactly as you want.

If the changing nature of your local business environment, this lack of control can have adverse effects on your business. Finally, you will never be able to keep all of you profits, as most franchise agreements involve some form of continuing payment to the franchisor related to sales or profits.

Taking up a franchise can be an attractive starting point for those entering into business for the first time. But beware: not all franchise operations are the same. As a guide to investigating a franchise use the checklist in my website, http://www.millionaire-idea.com/buying-a-franchise.html