This document discusses establishing a business as a franchise. It defines a franchise as a legal agreement where an individual is given the right to market a company's products or services in a particular area. The franchisee purchases the franchise agreement from the franchisor. Some advantages of buying a franchise include access to an existing brand and operating system, known setup costs, training and support from the franchisor. However, disadvantages include high initial costs, ongoing royalty fees that lower profits, and less freedom to make decisions.

1. ESTABLISHING A BUSINESS
AS A FRANCHISE
What is a franchise.
Recognize the
advantages and
disadvantages of
starting a franchise or a
new business.

2. FRANCHISE OWNERSHIP
A franchise is a legal agreement
that gives an individual the right to
market a company’s products or
services in a particular area.
A franchisee is the person who
purchases a franchise agreement.
A franchisor is the person or
company that offers a franchise for
purchase.

3. BUYING A FRANCHISE
Advantages
Access to existing brand and
operating system
Known set up cost
Get Training and Support With
Running Business
On going advice, guidance and
support from the franchisor

4. BUYING A FRANCHISE
Advantages
Pay Less For Equipment and Supplies
Because Company Can Buy In Large
Quantities
Product Consistency
Centrally orginised marketing and
brand promotion
Franchisor’s brand and advise reduces
risk of failure
etc

5. BUY A FRANCHISE
Disadvantages
 Initial Costs Expensive—Franchise Costs
 Costs That Lower Profits—Royalties
 Owner Has Less Freedom To Make
Decisions
 A franchise is for limited time only
 Lack of independence to be completely
innovative
 Franchisor Can Terminate Agreement If
You Don’t Pay or Follow Agreement
Instructions

6. BUY A FRANCHISE
disadvantages
 risk of franchisee business failure is not
eliminated
 Payment of extra marketing levy
 Franchisor may choose unsuccessful
marketing strategies
 Training of staff may not meet
expectations or be primarily technical in
nature
 Risk that fellow franchisees damage the
brand and indirectly your business
 etc.

7. OPERATING COSTS OF A
FRANCHISE
Initial franchise fee
Start-up costs
Royalty fees
Advertising fees