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Franchise: a business option in Atlantic City

On Behalf of | Jul 11, 2022 | Business Formation & Planning

Summer in 2022 brings optimism with it to Atlantic City. New businesses from casinos and hotels to hospitality and other non-gambling ventures hope to spur economic growth. Business ventures pose unavoidable risks yet present tremendous rewards. Those who lack massive capital have an option to consider in these changing times: a franchise.

Investments in Atlantic City create opportunities

The prospects for Atlantic City come well-funded. A federal grant of $6 million will rebuild a section of the Boardwalk; a $1.5 million indoor go-kart track will open. One casino has a multi-million dollar renovation in place for its rooftop outdoor pool. Hard Rock will spend $20 million on renovations. Success will require growth in entertainment-related industries that a franchise could provide.

Advantages vs. Disadvantages of a franchise

Franchisees act as third parties who purchase brand rights from the brand owner, or franchisor. They pay an initial fee for the rights to use the brand and ongoing fees for marketing and royalties. In a complex business relationship, a franchise offers several advantages and disadvantages to a franchisee. These include:

Advantages

  • Business Assistance – franchisors often provide the equipment, supplies, and advertising plan as well as access to their goodwill.
  • Lower Failure Rate – Likelihood of failure ranks below a sole proprietorship owing to the brand’s proven success
  • Lower Risk – Franchise networks are often owned by established corporations with a proven business model in markets.

Disadvantages

  • Regulations – Business decisions often require input from a franchisor that are otherwise unnecessary. Franchise agreements describe these restrictions, which may limit hours of operation, signage, layout, and pricing.
  • Ongoing Investment – The franchise agreement will enumerate these costs and will include royalty fees, advertising costs, and a charge for training services.
  • Lack of financial privacy – The franchisor can often oversee the entire franchise.

A rebirth for Atlantic City presents opportunities not only for those who visit and reside there but also for those who have considered starting a business. An attorney who understands Atlantic City and the requirements of business formation can help.