As with everything else in life, there are pros and cons involved in the decision of buying a franchise and it is important to consider every aspect before taking a decision.
Like any other business decision, there’s a lot to consider before buying a franchise. Does starting your own business offer you more long-term rewards or is buying a franchise a better choice for you?
So, here is a list of all the pros and cons associated with the decision of buying a franchise. As you go through this list below, you will not only come across a number of reasons to think about, before getting a franchise, but it also shows you some of the concerns you may have before taking the big decision.
Pros of Buying a Franchise
A franchise system is a well proven system. You can see the success of the business at different locations and now you get the opportunity to replicate the same “proven” model in your area.
A Good Franchisor will offer you complete support to run your project and avoid any costly mistakes, thereby saving a lot of money.
A franchisor’s technology budget is probably larger than yours, so you can expect a lot of great tools for you, to use in your project. And not just any tools…any technology. You should expect to have great technology at your disposal.
Today’s franchisors have extensive support systems in place, to help you and your franchise project thrive. From specialists in all aspects of operations to trainers and field representatives who will visit you in person, all the support tools and people are there to provide assistance to you.
Franchisors have a built-in network. That’s right; other franchise owners who have invested in a franchise opportunity are all together in this. They have experienced things from the front line, and can help you out with most of the problems that may arise – especially at the beginning, when you first start your project. With a franchise, you’re in business for yourself and not by yourself.
Formal Training Program
Good franchisors provide good training to their franchisees. This usually includes classroom-style training at their corporate headquarters. Franchisees are taught things like pre-opening procedures, daily operations, marketing techniques, hiring practices, software use and more.
The more established franchises provide a market awareness & brand name to their franchisees. This can amount to great savings in customer acquisition costs and allow for more time in the operation of the business.
Lower Inventory Prices
The collective buying power of a franchise group allows for lower costs in purchasing the inventory, whereas independent projects have a less bargaining power with the suppliers.
Easier Staff Recruiting
A franchise business with a recognised name will have a greater recruiting pull than an unknown business entity.
Access to Proprietary Methods
There’s no need to reinvent the wheel as the franchisees get access to all the trade secrets to success.
Ongoing Research and Development for introducing New Products
Franchisees have the opportunity to concentrate on improving their operations and let the franchisor spend the time and money on developing newer products.
The Boss is You!
As with owning any other project, you will be in control of your franchise unit.
Easier to Sell
If you want to exit the project at any time – you will be able to find a buyer who will readily pay a premium for the goodwill you have created in your area. It is difficult to sell a stand-alone project for the lack of recognition the franchisee holds.
For all of the above listed reasons, starting a franchise of an established brand poses a lesser risk than starting a business from scratch.
Cons of Buying A Franchise
You must follow the Franchisor’s rules
Franchisees are required to share their financial information and conform to the uniform and “proven” operating procedures of the franchisor.
Upfront Franchise Fee Payment to use the Franchise System
The franchise fee is a one-time charge. It’s the cost of entry when you buy a franchise. Paying an upfront fee does raise the price of going into business.
That’s right. In addition to the upfront franchise fee, you’re required to pay the franchisor a percentage of your sales, each and every month, in return for their support in operations and advertising.
You must use the Franchisor’s Logos and Advertising Material
Using the franchisors signage, logos, and colors etc. are a part of what you’re paying for. They’re all licensed for you to use. You cannot be thinking about getting all creative and going against the grain here. You represent the brand you bought into. So, you don’t have the freedom of going beyond the franchisor’s Brand Logo, signage, etc.
Dependent on Franchisor Success:
The reputation of your franchise is only as good as that of the franchisor, so any difficulties that the franchisor encounters will have a direct impact on your business.
In conclusion, when the time comes to decide on buying a franchise — or not buying a franchise — you will have to weigh all these pros and cons. You know your tolerance level better, for things such as needing to follow the franchisor’s rules versus making your own rules. You will need to think long and hard about what is right for you.
So, take the time to consider and compare your options, before committing to either taking a franchise of a reputed brand or starting your own project.