Why starting a franchise is better than starting a new business Essay

Why starting a franchise is better than starting a new business - Essay Example As a matter of fact, there is a vast array of different available alternatives and opportunities such that it is often difficult to decide on the best plan to follow. After choosing the best path, one would require help starting the business, hence the need to appreciate the differences between starting a business and franchising opportunities, as well as choosing which plan is the most applicable (Bradach 99). Although franchising is similar to starting one’s own business in various aspects, these business initiatives are inherently quite dissimilar. This paper will examine the reasons why it is better to start a franchise rather than a new business. Broadly speaking, franchising refers to the means of operating a commercial operation through the use of certain elements or aspects of other businesses, for instance, its products, brand and name. Previously, this entailed licensing agreements where business operators had the right to sell certain products in certain markers, di stribution deals that work on the same basis or other form of agency agreement in which one runs part of a greater business. However, today, franchising refers to the granting of licenses to trade under similar names as the parent companies and to make use of all or most of the aspects, which make these businesses successful to enable one’s venture to strive. ... Such support, however, runs for the duration of the franchise agreement. The contract entails the franchisee agreeing to pay the franchisor for the privilege to use such support and business tools. In most instances, such payment is made upfront although the franchisee has to pay numerous staged payments as the business develops (Libava 81). However, it is evident that certain franchise agreements stipulate that franchisees have to make additional payments if the business grows to be exceedingly successful, but, in most cases, this amount is a regular flat rate. Although in most cases the startup cost of starting a franchise is quite large, this cost is substantially lower than the cost of starting the same business from scratch. Some of the most notable franchises include, among others, Subway, Hampton Hotels, 7-Eleven Inc, Anytime Fitness, Supercuts and McDonald’s and Pizza Hut Inc. These businesses are quite profitable and their brands are widely acclaimed all over the worl d. Starting such a business from scratch can cost quite a lot. However, franchising allows business owners to pay low costs in order to start these businesses. For instance, in order to start franchises such as McDonald’s, one only requires between $1.07 million and $1.89 million, to start a Subway franchise one needs between $85,200 and $260,350. On the other hand, in order to start a Hampton Hotel franchise, one must pay the franchisor between $3.7 million and $13.52 million. These figures go to show that starting a franchise is way cheaper than establishing such a massive company. Perhaps one of the most attractive aspects of franchising is the reduction of risk. The business is not essentially a new