Advantages And Disadvantages Of Buying A Business

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Word count: 1600 words, excluding references. In this essay the author is going to critically analyse the advantages and disadvantages of an entrepreneur buying a business format franchise. The challenges of starting a new business and keeping it going cannot be easy and many don’t manage to succeed, even in the very good times. The hurdles can be substantial and the ability to get a business up to speed, making profit and supporting you is hard to achieve by many. Franchising has attracted the attention of many over past years and the tough economic climate has highlighted its strengths and shown that there is a more secure way to start your own business. Its formula of a locally owned and run enterprise, driven by a small business owner,…show more content…
The franchisor has already gone through the process of finding out what works and what doesn’t they have invested in the system and are now willing to teach you how to replicate it. However, don’t think you can pick and choose which parts of the system you want to use: it is very much all or nothing. But if you are paying for a proven system, why wouldn’t you follow it? Buying a business format franchise can be a quick way to set up your own business without starting from scratch. There are many benefits of franchising but there are also many drawbacks to consider. Advantages and disadvantages of franchising (online) available from accessed on 1 December…show more content…
The Initial and continuing fees Franchisors will charge new franchisees a lump sum to startup a business using their brand name. Although this can be under £1,000, the amount varies greatly according to the franchisor. Some franchisors insist that you purchase most of the materials you need from your own pocket, and some will demand that you have a certain amount of working capital before you are even considered to be a suitable candidate. Unfortunately, the costs don’t end there. Franchisors will take a regular slice of your takings as royalty fees. If you have a tight profit margin, the bad news is that this fee is deducted from your actual turnover, not the surplus you make. Once your fixed-term contract is up with your franchisor, your wallet will again be needed, as you will have to pay another fee to extend the time you can trade under the company’s name. This is based on how well your firm is doing at the time. Although these costs may compare favorably to those if you were starting up on your own business, it is worth remembering that you will often have to deal with all the normal overheads that a business generates. It all adds up to a fairly large amount and you must be sure that you have the necessary capital behind you before you embark on your franchise. You do things their way, not yours, as mentioned before, each franchisee will gain training and guidelines on

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