Some Risk Factors Do Involve In Franchise Business

Business entrepreneurs often wonder if they should franchise to expand their operations. Majority of franchise in pharma companies bring profits to their owners. Still it is a business model that has its own benefits and drawbacks.

There is no such way to find out if franchise business will come out as a profitable option for you until you evaluate its pros and cons in regard of your operations. This will need assistance of a consultant, but before contacting experts and talking about the subject, you should understand the advantages and disadvantages of a franchise business.

Business owners seeking for better expanding opportunities can avail top three benefits from franchising –

1. Access to better talent

Franchising is the best way to get talented people who can manage your locations and give them an incentive for efficient performance. The most qualified and hardworking people prefer to invest in running business in return for profits instead of working as an employee and getting salary.

So, by franchising, you will get better talent for your company that will do their work with dedication and generate profit for the company.

2. Easy expansion capital

Franchising is a great way to achieve expansion capital. Since your franchisees pay to buy outlets in your chain, you can spread your brand at numerous locations without making request to financing from investors or banks.

3. Minimized growth risk

Franchising can bring high financial returns for little risk. By not adding company-owned outlets, when you franchise, you make less investment into adding each location. In case your business model is really good, you can make high earnings from sales at those outlets.

The things have not end here. Franchising has its negative side as well. The disadvantages of franchising business model are as under-

  1. Less control over managers – You cannot tell the franchise owners about their job because they are not your employees. They are independent business runners having different goals.
  2. Innovation challenges – The harder thing to do is to innovate with franchising. With franchising, if you bring new idea, you have to offer discount to franchisees to make them accept the new products or concept you will introduce.

So, before franchising your business, it would be better if you consider these pros and cons of franchise business. Franchise in pharma companies also follows the same ritual. You have to do research before giving franchise to a franchisee.

Leave a Comment