Setting up a business from scratch is risky. It involves not just financial investment but requires an idea that can work in practice. Making such a business successful demands a lot of perseverance, patience and even then, it might not turn into a profit making enterprise. This keeps most investors away from investing in new startups. Al alternative is to obtain franchise for sale deposit Cairns rights to an already successful business that has a degree of recognition with the public and does not have to be built from the ground up.
The franchising model has been especially popular for the restaurant business. Other industries have not been as conductive to the franchising business model. A franchising agreement involves an agreement between a franchiser and a franchisee. Both parties obtain several benefits from the arrangement. The franchiser receivers a sum upfront and gets to benefit from its already established brand name. The franchiser also gets to status risk free and does not have a direct stake in the business as it is not affected in case the business fails to be successful. The franchisee gets to have a business that already has recognition with the public. They publicity expenses are usually borne by the franchiser and this results in further cost savings. For a lot of businesses, advertising and publicity expenses are a material figure and constitute the single biggest discretionary expense they engage in. Saving money in the way of advertisement expenses is often the difference between a successful and unsuccessful business. The importance can not be understated.
There are many costs associated with a franchising agreement. Almost all of these have to be paid by the franchisee. The first major cost relates to the initial security deposit for the franchise paid to the franchiser. This is usually a significant amount. It might be paid all at once or in the form of installments. The exact amount and the terms of payment are specified on the franchising agreement. A foreign franchiser might require that the sum be paid on a foreign currency. This might entail expenses relating to foreign exchange.
Other costs include the costs of infrastructure and training. Most reputed and established franchisers require that the franchisee should invest in infrastructure and interior to their standards. There might also be costs associated with quality control. The quality control costs are especially significant for business that serve edible products. Another reason for quality control costs is that the franchiser might be concerned about reputation losses resulting from bad quality products or poor customer service.
Other costs might include legal costs associated with registration of the franchise agreement with a government body. This also includes the costs paid to solicitors and legal professionals. For agreements involving major franchisers, the costs may amount in the millions. This alone deters small investors from pursuing a franchising agreement.
