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The pros and cons of franchising

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pros cons

Pros 

  • It reduces risk of business failure - less than 7% of franchise owners fail within the first 3 years, as opposed to over 90% of new business start-ups.
  • Enables a small business to compete with a big business. 
  • Products, services and system tried and tested. 
  • Very steep learning curve in very short time increasing chances of success - mostly no previous experience in a particular business is necessary for a franchisee to operate it

    *however a Diamond Franchise does require some product knowledge so this isn’t always true.

  • Centralised Marketing - so franchisee can focus on money making aspects – sales and operations
  • Exclusive territorial rights - Gives them a monopoly over the area allocated to them preserving their business in the future. 
  • Back up - Including managerial and administrative services, product information and marketing support.

Cons

  • Lack of independence - If you are a maverick this ain't for you, you have to be able to follow a system. 
  • Inflexibility - You wouldn't go into McDonald's and expect a different burger. That's the point of franchising, everything is supposed to be standardised because it works!
  • Risk associated with the franchisers performance - Franchiser monitoring, visits are welcome initially, but some franchises think it’s intrusive as time passes.  At Diamond our guys and gals love a visit – we are on big happy family so visits and get together are requested by our franchisees!
  • Service charges - Some franchises service fees are onerous. At diamond our focus is on building profitable depots so service fees are 50% of other competitors fees.  Plus we add so much value with centralised administration and credit control it’s really worth your while.
  • Reputation - Each franchisee affects the reputation of the whole system depending on their performance and ability. At diamond we know, We are only as strong as our weakest team member so we have to be very careful with who we select.
  • Risk associated with franchiser performance - Not all franchise businesses are soundly based or well run. Get references and check accounts. There are different stages in a Franchiser's life – all have different risks/benefits. The Established Franchiser – least risky, but cost high, and potentially inflexible. The New Franchiser – lower initial investment, more flexible, learning curve for all on board. Watch out for the Unethical or Incompetent Franchiser – look for companies with a great reputation so you know they will do as they say and have the very best intentions at heart.

To find out more about a Franchisor who is invested in building a successful network around the UK check out https://diamondlogistics.co.uk/franchise-opportunities/