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Disadvantages of a Franchise Business

You might think it’s less risky to buy a franchise business. But if you look at most successful businesses and how franchisors started, they took big risks just so they can do well. So why rely on a proven formula when you can create a business model of your own? Here are reasons why franchise business is a thing of the past; reasons that’ll motivate you to go into a business that’s purely and creatively designed by you.

  • Starting a franchise business can be costly. Buying a franchise, especially one that’s been successful, can be very costly, because franchisors are banking on the idea that if you buy their businesses, you will definitely earn a lot of money. They provide you everything you need from supplies and training.
  • Not all business models sold as franchises are sold because they’re successful. Some companies sell franchises not because their businesses are successful. They sell to earn money out of people who want to earn cash fast.
  • Your franchisor has control over your franchise. Your operations have to follow the pattern given by your franchisor. You cannot adjust your franchise business to your local market’s needs.
  • After the cost of buying a franchise, you still have to pay for other fees to your franchisor. You have to pay a monthly fee for royalties. Apart from royalties, a fraction of your revenue also has to go to your franchisor.
  • The reputation of one franchise can make or break the reputation of the others. If a franchise from a town nearby provides faulty services, your reputation will also get affected.
  • Mother companies don’t always take care of their franchises. Some mother companies leave you to run your franchise on your own after they help you with starting up your franchise business. Their only connection to you will be the fees they’ll get from you.
  • Just because a franchise’s model is believed to be a proven formula, it will sell in your area. It might not be suited to the tastes of the potential market in your franchise location. It might have sold in a nearby town but it isn’t guaranteed to sell in your area.
  • Your franchise’s growth is limited by your franchisor. You cannot add anything to your line of products just to accommodate suggestions given by your customers. You cannot grow on your own. Your franchisor is the only one who can change your product line and business model.
  • Creativity is in. Most start-up businesses, especially internet businesses, have been made by entrepreneurs who allowed themselves to be limited only by their imagination. People these days like to experiment with new things, and the creativity of new businesses attract a lot of customers.
  • More people are going for niche products. A franchise business offers products that have become run-of-the-mill, ordinary. More people are going out of their way to look for businesses that offer products that are unique, that cater to particular niches. People don’t give too much attention on brands anymore. Instead, they are focusing on getting products that are specialized for their particular needs.

Employers Liability Insurance and Its Benefits for Small Businesses

Any company, whether it is small or large, having permanent or temporary employees should have employers’ liability insurance. It is not only necessary but is mandatory in UK according to the Employers Liability (Compulsory Insurance) Act, 1969. This insurance helps the business in covering the unexpected costs that comes from injuries or fatalities of its employees. Especially for small businesses, this is particularly advantageous owing to the extremely high costs of health and safety needs, which when incurred unexpectedly makes it difficult for the business to bear.

The below points discussed will help you know what actually the employers liability insurance covers and why it is important for small businesses.

What liability it covers? Employers’ liability insurance covers the costs associated with the injuries or fatal accidents occurred to the employees on site or off site while performing their job. In addition to the medical costs, the lost pay during the treatment period of the employees is also covered. It also covers the legal costs which are incurred due to the lawsuits filed by the employee/his family against the employer for causing injury or death.

How is it helpful for the employer? Small businesses have limited capital which is not enough to rescue the business out of hardships. The employers’ insurance cover is an important part of the risk management system of a business. Thus, by having employers’ liability insurance, small businesses can be assured of timely monetary help at the time of unforeseen financial liabilities. Also, this insurance creates a sense of security among the employees. It also shows that the employer cares for the employees.

What happens without it? Small businesses have higher chances of going bankrupt if they don’t have employers’ liability insurance. Any employer who runs his business without this insurance, in spite of being aware of the fact that his business may pose potential risk for its employees, is liable for legal prosecution. Moreover, as per the Act, it is also compulsory for every business with reasonable number of employees to have this insurance cover – otherwise the business will be fined.

Small businesses can benefit more Unlike large businesses, small businesses will have limited access to financial resources. With this insurance, a small firm can easily cope up with the employees’ claims costs, which sometimes run into hundreds and thousands of pounds. This insurance also helps the small business in building up the reputation, bringing employee satisfaction and being in compliance with the legal laws.

As a small business owner/manager, you may worry about the premiums that are needed to be paid every month/year. Remember, you cannot put your whole business at risk trying to save marginal amount that you are supposed to spend on employers’ liability insurance.