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The collective buying power of a franchise



The collective buying power of a franchise
   

People tend to buy a franchise business because there are several benefits of a franchise system. The fact that you don’t have to invent the wheel is perhaps the biggest benefit of them all. By cashing into the established brand-name of the franchisor, a franchisee can achieve success at a much faster rate than a stand-alone businessman. The comprehensive training and effective support that a franchisee gets also help him to avoid mistakes to some great extent. A franchisee is never alone when he is starting a franchise; the franchisor stays with him during the construction, procurement and opening phases of the franchised unit.

Another area where franchising scores over stand-alone business is the purchasing power of the franchisor. An individual owner sometimes gets minimal or no discount from the manufacturers and distributors. On the other hand, when a franchisor is placing the order, it’s doing that on behalf of all its franchisees. Naturally, the order amount is huge and so the manufacturers and distributors agree to lower their profit margin in order to get the order. The sheer volume of order (and that too at regular intervals) is enough to compensate whatever discount they are giving to the franchisor. The franchisees that brought the franchise business for sale offers, in turn, get the products at a much lower price.

That helps them in two ways. Firstly, if they sell the products/service at the same rate as in an individual business, the profit margin becomes higher for them. Secondly, if they decide to pass the benefits of the lowered price to the customers, they can sell the same product/service at a much lower rate than the neighboring mom-and-pop establishment. Hence, the number of footfalls increases in a franchised store, because everyone loves a good bargain. There’s another advantage that comes from the collective buying power of the franchisor – many manufacturers and distributors allow a line of credit to the franchisees of the top franchises in the business. But getting that for a greenhorn businessman is next to impossible!



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About the Author


Ray Flores
(Visit Ray's Website)
brandEXPANSION is the only firm of its kind serving all aspects of franchising. With our industry background and successful franchise units established around the world, we have a time tested strategy to assist you in locating, developing, advertising, marketing and executing the optimal franchisor and franchisee strategy. brandEXPANSION brings over a dozen years of hands on experience in the field. This gives us an insider’s perspective on the business of franchising, which is an invaluable asset in supporting your objectives. We simplify the franchise experience by providing on going consulting and support designed to deliver the most profitable franchise investment you can attain. brandEXPANSION has placed franchise units in over 1000 locations nationwide. This includes the strategy and writing of franchise documents, over 600 franchise real estate locations selected, over 200 construction projects completed and over 250 proven franchise companies currently represented. The company also operates the leading franchise-industry social networking site, www.FranchiseUltraLounge.com.
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