Some of the advantages are
- franchisees do not have to have lots of previous business experience;
- franchisees usually do not need a lot of start-up capital, compared to a brand new, stand-alone venture; and
- franchisees are typically perceived to be at relatively low risk of business failure, provided the franchise has been properly set up, and often find it easier than the average start-up to get financial backing.
However there are some risks which can arise if the franchise operation is not set up and run properly - for example:
- the franchisor can lose control of its confidential know-how;
- the franchisor's brand can be damaged by unauthorised business practices, if the franchisee cannot be controlled - which is dependent on how securely the franchise agreement and operations manual are drawn up; and
- the franchisor may find it has under-estimated the time and costs of properly training and supervising its franchisees, if the operations manual is not well drafted.
Many businesses are well suited to franchising. Successful franchise operations tend to have at least one of: a strongly recognisable brand, bulk buying power, and a proven business technique. Some of the most common types of franchised businesses include:
- fast food restaurants,
- driving instructors,
- retail shops
- services to the public,
- health clubs,
- delivery businesses,
- home services (e.g. cleaners, maintainers); and
- automotive sale and repair businesses.