Franchising without investments: is it real?

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

In order to efficiently and quickly organize your own business, you usually need not only certain skills and knowledge, but also significant financial resources. Now there are two ways for aspiring entrepreneurs to organize their

business. The first of them provides for the independent creation of a business and its promotion. The second is to cooperate with a company that has been on the market for a long time and has already earned its credibility. In economics, this phenomenon is known as franchising. In this case, it will not be possible to do without investments, but it is still possible to significantly reduce costs. The use of a franchise, the cost of which varies widely, often allows aspiring businessmen to bypass a number of problems that are inherent in a new business. Franchising without investment has its advantages and disadvantages.

Among the benefits, first of all, it should be noted the possibility of significant savings in money for starting a business. A company that sells a franchise is also interested in positive results, because we are talking about its credibility. Representativesthe franchisor will definitely advise the newcomer on the correct and efficient use of materials and equipment, work with suppliers, the marketing system and other issues. Due to the fact that the development of the company is due to the attraction of other people's resources, changes in profits in its balance sheet occur very quickly compared to other business methods. Plus, you can also earn money without investments by using a developed brand. This also includes its marketing schemes and advertising. At the same time, the consumer of services and goods often has no idea who their supplier is.

There are also disadvantages here. If you understand it well, then we can conclude that, in principle, franchising without investments is impossible. Like it or not, you will have to pay for the franchise itself. In addition, an entrepreneur who decides to go through a partnership path of doing business becomes a hostage to the franchisor in terms of a limited choice of his own development strategy. As practice shows, a franchise agreement is signed for a very long time, so it is very problematic to terminate cooperation. If the entrepreneur gets tired of doing business this way, and he decides to stop fulfilling his obligations, sanctions will be applied to him.

Despite everything, franchising without investment is now very popular in many world countries. According to the statistics of American researchers, in the United States during the firstyears of operation, on average, three out of four established enterprises fail. At the same time, more than 85 percent of companies operating under the franchising system are sure to survive and feel very well. Theoretically, you can pay nothing at all for a franchise and take it for free. However, as practice shows, such an asset can hardly be called valuable, since such companies are practically not viable. An enterprise that cannot sell its business is unlikely to sell its products. A prime example of such a business idea without investment is network marketing, which is unlikely to bring the desired income.