What is a Franchise? Get to Know How to Start One!

What is a Franchise – Many people are interested in opening a business today. However, sometimes they are confused about choosing a prosperous one. Well, then, try to find a business scheme that suits you or the capital you have.

There are lots of ways or schemes for someone to open a business. One that is currently popular in Indonesia is a franchise business. Have you heard of this term before? If not, Whiz will explain what a franchiseis here this time. Stay tuned, OK!

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What is a Franchise?

What is a Franchise? Get to Know How to Start One!

Quoted from peraturan.bpk.go.id, per Permendag No. 71 of 2019, franchising or a franchise is a special right owned by a person or business entity of a business system with business characteristics. A franchise is marketing goods or services that have proven successful so that other parties can utilize them based on a franchise agreement.

In addition, in the Great Indonesian Dictionary (KBBI), a franchise or franchising means cooperation in the field of business with a profit-sharing system under an agreement that includes management rights and marketing rights.

Furthermore, the Indonesian Franchise Association (AFI) also revealed that a franchise is the same as a franchise business, which distributes goods or services to customers. In this business, the brand owner will give rights to individuals or business entities to run a business on the brand.

The primary owner of the mark has also determined the name, procedures, and methods. Simply put, a franchise is a branch business or business duplication to another party (a person or a business entity).

How? It's understandable, right? If interested, let's consider the advantages and disadvantages of starting a franchise.

Advantages and Disadvantages of a Franchise Business

What is a Franchise? Get to Know How to Start One!

Advantages of Opening a Franchise Business

1. Profitable

A franchise can be very profitable, you know. A popular franchise will surely have high costs or capital, but your profits can be higher than the capital you spend. Wow, it's tempting, right?

2. Business Assistance

By owning a franchise business, you will also receive assistance while running it. You will receive various tools, clear instructions for running the business, quality supplies of materials, and much more.

Besides that, you will also receive training on management, marketing, and benefit from promotions or campaigns through the national media as well.

3. Low Failure Rate

When you start a franchisebusiness, you have bought a set and successful concept from the product owner. Statistics also show that opening a franchise is more likely to succeed than independent businesses.

4. Brand Recognition

As someone who opens a franchise, usually, the products are already well-known. Opening a franchise makes it easier for you to market the product. You no longer need to pay more to get new consumers or customers.

5. Established Business and Financial Management

It's expected of a franchise business to have good business management. As a business owner, you no longer need to think about products, business ideas, or business systems. You have to practice it in the new location that you run.

It goes the same even with financial management. A franchise business already has a partner, so the owner will have its financial management arranged. As the one who runs a franchise, a well-tested financial management system will make it easier for you to manage your finances.

Disadvantages of a Franchise Business

1. Large Initial Cost

It's no longer surprising if you want to open a franchisebusiness, you must have a large enough capital. Lots of costs must be incurred. For this reason, before opening this business, you must prepare very qualified finances.

2. Fully Controlled by the Franchisor

Franchisor is the first product owner of the franchise who has complete control. For example, as a businessman of a franchise, you have related innovations or new ideas franchise that differ from the franchisor's agreement. This is because they have full authority over the business you are running.

3. Easily Affected Reputation

If the reputation of a franchise is lousy in one location, the franchise you are opening will be affected too. While at the same time, the franchise at your site is running fine. That way, you will also lose a few percent of turnover and customers.

4. Stuck in a Trend

Despite mature marketing, buyers of a franchise are usually caught in the market trend. Consumer behavior that often changes can affect your franchisebusiness, you know. For example, Thai tea franchises are slowly being replaced by other trending beverage businesses.

5. Profit Cuts Occur

The businessman of a franchise are obliged to pay royalties from the profits earned. So, if, for example, you get a little profit, the net profit you will get is even less because there is profit sharing by the upper party.

Everything we do certainly has advantages and disadvantages. If you are passionate about a franchisebusiness, here's how to open a franchise business.

How to Open a Franchise

1. Strategic Location Is Key

What is a Franchise? Get to Know How to Start One!

Even if the franchise business you chose is well-known to many people, determining the location is the main thing. Choose a strategic location. Also, ensure that your chosen place is your business target, for example, the target consumers.

The more careful you are in choosing a strategic location, the higher the profit potential you will get.

2. Make Sure Your Capital is Sufficient

Prepare sufficient capital to open a franchise of your choice. Don't let your business profits slow down because your capital is insufficient.

3. Do a Check on the Franchise

What is a Franchise? Get to Know How to Start One!

The next step is double-checking the franchise you will open, OK. Ensure the reputation of the franchise you choose is trusted and follows your target market. You can also compare your franchisebusiness with other kinds of franchise businesses.

That way, you are more prepared and steady in opening a franchise.

4. Get to Know the Target Market

What is a Franchise? Get to Know How to Start One!

After finding out which franchise you will choose, knowing the target market of the franchise that you open is very important. Ensure the business and the target market you have set up are compatible.

5. Use Social Media

What is a Franchise? Get to Know How to Start One!

One of the suitable ways to market your franchiseproduct is through social media. Only with gadgets can you sell your products widely if you carefully use them.

Consider asking for help from the people closest to you to promote your product, OK?

6. Customize with Your Interest

Many franchise businesses look promising—for example, mini markets, restaurants, cafes, salons, courses, etc. In opening a franchise business, your interest is crucial because you will enjoy doing your business more.

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Well, that's an explanation of what a franchiseis. How? Are you interested in opening a franchise? Come on, try it. However, you must ensure your financial condition is secure before trying it.

Try to use the Whiz financial application.. You can manage finances well using Whiz. There are also many benefits that you will also get!