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Advantages of Buying a Franchise Business

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Many people dream about owning a proud American franchise business, but buying a franchise is not an easy task. Some entrepreneurs are scared to establish or start a new business due to lake of experience on how to start or how to run a business. They think that a franchise business is good for them as they will get constant support from the franchisor to run the business successfully. And also they have lots of fears and questions about the viability of the business, financial support, technical assistance, licenses and permits, etc. For those entrepreneurs, the franchise business model is ideal and one of the best businesses available in the market. The franchisor provides to individual franchisee outlets or franchise businesses with a proven system and they support the franchisee in operating the business successfully.

Effective Management

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The franchisor will continuously monitor store sales, conduct periodic counting of inventory, notify of fluctuations in store sales, assist to increase store sales, provide training to the business owners and employees, introduce business sales promotions, high-end marketing, doing the accounting work, monitoring the market analysis, bringing new products and services which increase the sales, and also they focus on particular areas of need. This assistance certainly helps you to increase your time focused on your sales and also reduces your personal management risk. Their updated technology and methods can boost your sales and you will be running a business successfully.

Franchisor Marketing

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One of the keys for success is marketing. Any products or services will be known to the customers based on advertising. These companies spend at least 4 to 6% of their revenue on marketing and that constantly reminds the customers about the products, services, and promotions which makes them your everyday customers. The success of any business directly relates to marketing and that costs a lot of money. As an individual it is hard to spend that much money and it takes a longer time to build a reputation. By buying a franchise business you chances of success will increase.

Great Sales

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The most common reasons to buy a franchise business are to have higher sales, more services, and have a great profit margin. The reason for the higher sales is a lower price than a non-branded store and the ability to make available of variety of services and products that match customers’ needs and all of this adds to the business to increase the sales. Due to higher sales volume the cash flow will be higher and that make sense to the investor who is interested in participating in a franchise business. In the case of an individual owner it is hard add a variety of products and services, as it costs a lot of money, labor, and supervision to effectively add things. In the franchise business, the management knows what the community needs and they add those things with low cost and high yield returns, and that brings more sales and high returns to the business. This is one of the greatest advantages why buyers are interested in franchise businesses /branded businesses more than individual businesses/unbranded businesses.

Price to Price

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Any business cash flow reflects the volume of sales, margin of goods, and services offered by the business. The franchisor buys inventory directly from the manufacturers at a lower price than market price and even sometimes they finance the manufacturers to increase the product output and that leads to the franchise business having a better margin than others. Their price to price is very effective and most successful for growth which you can see in the franchise business. On a few occasions the franchisor has their own manufacturing units which bring certain products at a lower cost than anyone else. This is one of the greatest advantages of a franchise business compared to an individual business which has more margins with less cost of goods.

Lower Investments

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One of the biggest problems in establishing a new business is the need for a high amount of cash. It is a nightmare for individual businesses to get financing from a financial institution. Too much documentation and more and more additional security will lead entrepreneurs to give up the idea of establishing a business. The lenders are scared to invest in the individual owned businesses as they are not sure about the business cash flow. In the case of a franchise there is already a proven and successful business model and this assures the investors of the guaranty of their loan amount and possibility of repayment of financed money. That is the reason why most people are inclined to buy a franchise business with a lower down payment than an individual owned business.

Business Destiny

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The market is changing and consumer needs are growing and changing. Any business that can adjust their services to the needs of customers is surviving while other businesses are vanishing from the market. In order to satisfy the customer’s needs and to adopt the required progressive changes, the business owner has to make changes in the business. To make all these changes owners have to spend a lot of money. The individual owners cannot afford this because either they lack enough reserves or fear losing savings, and this leads to a decrease in sales or closing of the business. Whereas the franchisor may have a lot of money and surplus reserves which allows them to make necessary changes to satisfy the customer’s needs to lead to longevity of the business. This is one of the most common reasons why business owners want to own franchise businesses rather than individual businesses.

Greater Returns

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Every entrepreneur, before starting a new business, looks for the industry returns in that particular business category. Based on the world sales report most franchise businesses have higher returns than individual owned business. The most common reasons for the greater returns are higher sales and higher profit margins. The franchise business guaranties quality of products, services, competitive prices and other factors which boost the sales whereas other individual business are not able to give enough competition. Their low investment and higher possibility of financial assistance from the investors will lead to a safer environment for the franchise business and in turns it brings assured higher returns. This is why most entrepreneurs are inclined to buy a franchise business.

Better Quality

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Quality, quality, and nothing but quality for the customers. Any business or product will viable if it has high quality. The franchise business products, services, and other offerings always stand high on the quality side. The great thing about franchise goods, services, and products is that they have the same quality in all locations and they have better quality than individual businesses. That builds trust with the customers and market. The assurance of the same quality and experience will lead to repeated purchasing of the products, goods, etc. from the franchise business. The individual owners try to do the same but they are never able to match the franchise business quality and type, which creates a big gap between the franchise and non-franchise business goods quality. This is also one of the most common reasons why entrepreneurs want to buy a franchise business than start their own business.

Resalability / Transferability

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Any entrepreneur will review the nature of the risk of a business before starting one. The resalability is one important factor to know. If the business is not salable or transferable then the business has to close when the establishers are unable to run the business. All the efforts and goodwill will vanish. This is one of the greatest dangers with individual businesses; you established it and the day you are not there the business will drop. No buyer will be interested or, even if they are interested, they cannot offer the price for what you built as there is potential risk of the viability of the business. In the case of franchise businesses, the business has rules and regulations which are always transferable with similar kinds of continuations and hence most of the entrepreneurs are interested in buying a franchise business rather than an individual business.

Franchisor Assistance

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In the process of development all businesses will undergo a variety of changes which are necessary to adopt the new requirements of the customers. For individual owners it is hard to add those required changes to satisfy the customer’s needs hence they are either turning away business or they are unable to run the business profitably. The franchisors constantly monitor the new requirements, and once they identify the needs, they add the required changes to the business model. For any reason, if your sales go down, they will step in and they will identify and rectify the problems. They always work because your success is their success. Their support in all fields is part of the franchise agreement to keep you as a successful operator. Hence most entrepreneurs want to buy a franchise business

Company Umbrella

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All business owners want recognition and a reputation for their business. This is a part of social obligations and also respect in the practicing profession. For individual owners it is hard to get recognition for their professionalism as there are so many businesses in the market which may have a higher profile. Society cannot judge each and every business standard. In the case of the franchise the market knows the value and respects the business and business profession hence you can have better recognition than an individual owning a business. Also as you are part of the franchise which has a larger area of operations, reputation, and recognition, you can proudly say that you’re that business owner and your name will fall under the big company umbrella with pride of success.

If you want to know more about buying a franchise business, have further questions on how to buy a franchise business, or need assistance to buy a franchise business, please contact us at help@bizworldusa.com or 415-234-8833 and one of our professional consultants will contact you.