Every time you enter into a close business agreement with others, you open yourself up to the risk of litigation. While a well-developed and lawyer-approved franchise agreement should limit many possibilities for litigation between franchisors and franchisees, these disputes remain possible. – High entry and operating costs: it can be more expensive to create a franchise than an independent business. You can open your own burger bar for the fraction of the cost of buying the rights to a McDonald`s franchise. As a result, franchising is often an option that is only open to wealthy businessmen. Despite the benefits of self-management opportunities, a new entrepreneur should not take responsibilities and decisions lightly. You may have almost all the elements of the business and marketing of your franchise – but that doesn`t mean you can just sit back and let the system do all the work for you. Franchising a successful home business doesn`t necessarily promise that you will always be profitable. In fact, even experienced businessmen can fail with a successful franchise if they don`t choose the right home option. A franchise agreement can have many benefits for both the franchisor and the franchisee.
Franchisors benefit from franchise agreements because they allow companies to grow much faster than they otherwise could. Lack of money and manpower can lead to slow growth of a business. Through franchising, a company invests very little capital or labor because the franchisee provides both. The parent company is experiencing rapid growth with low financial risk. – franchisees must pay a significant percentage of their income to the franchisor: in addition to the pre-payment premium required to create a franchise, the franchisee must pay fees and royalties to the franchisor. Franchise fees can range from $5,000 to more than $1 million anywhere and can therefore be a significant effort for the franchisee. Royalties are paid regularly for the duration of the franchise agreement. You are either a percentage of an outlet`s gross income – usually below 10 percent of a sales company`s gross income – or a fixed tax.
I would recommend that Liz enter into a franchise agreement. It is clear that the benefits of a franchise outweigh the disadvantages.