The pros and cons of owning a franchise
If you have always dreamed of owning your own business, one option you may want to consider is buying a franchise. Basically, this means you buy the right to use a trademark, various practices, supplies, and marketing materials from an established parent business. Many fast food and fast-casual restaurants are franchises, as are some grocery stores, convenience stores, hardware stores, and cleaning companies.
Franchising can be a fast and easy way to start a business, but it’s not for everyone. Take a look at the following pros and cons of buying a franchise before you dive in.
Pro: You'll have name recognition.
Most franchises are already established and already have a certain reputation. Your business will not be completely new and unheard of to your potential customers, which will give you a leg-up on your marketing. Customers will also have an idea of what to expect when they buy your goods or services, so you won't have to provide a lot of education or guidance to new customers.
Pro: You'll have support.
Companies that franchise typically offer their franchisees plenty of training and support. If you run into any struggles when running your business, there will be resources for you to rely on and people to give you answers. You're not going into this blind and without much support as you do when you start your own, independent business from the ground up.
Pro: The company will have already figured out what works and what doesn't.
Typically, when you open a business, you spend the first year or two trying different strategies and figuring out what works best for you. With a franchise business, this has already been done. The owners have already experimented with various recipes, employment structures, and marketing tactics to deduce what works. You can skip the back-and-forth and stress of experimentation and just do what is already known to work.
Con: The startup costs can be high.
When you open an independent business, you can start small and invest money little by little, over time. With a franchise, on the other hand, you typically pay the startup costs all at once at the beginning. If your funds are limited and you don't have a good source of financing, this can be difficult.
With most franchises, there are also ongoing fees that you have to pay to the parent company. You benefit from paying these fees because, in return, you get to use the company's marketing materials and resources. However, if business is slow for a time, the fees may feel like a burden.
Con: You don't get a lot of freedom or independence.
When you buy a franchise business, you are selling the parent company's product in the way they prefer you to do so. You can only make so many changes. If the company's regulations don't suit you, there's not a lot you can do. You are legally obligated under a contract to stick to those regulations.
While some business owners like having this defined structure, others feel it a bit restrictive. If you are someone who highly values independence and creativity, owning a franchise might not be for you.
If you are looking for a business you can start without having to do a lot of research, marketing, or experimentation, then buying a franchise might be a smart choice. Just make sure you understand the cost involved and find the lack of independence acceptable.
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