Franchise Advantages and Disadvantages

Before Buying a Franchise, It is Important to Consider the Pros and Cons of Franchising

When contemplating whether or not to start a business, it is important to decide if you want to operate independently or purchase a franchise. There are many advantages and disadvantages to owning a franchise. Franchising is great for anyone who would like to be their own boss, likes quick growth, and is willing to follow a proven system. But franchising isn’t for everyone.

As a franchisee, you are responsible for providing the franchisor with the fees to purchase the business. Many franchisees put their life savings into the business. Franchise consultants, who offer prospective franchisees advice to determine if franchising is right for them, suggest not even trying to buy a franchise without having a good amount of liquid cash. It’s a great industry, but certainly not for everybody.

Advantages to Franchising

There are various franchise pros and cons. Advantages include:

  • A Proven System: A franchise increases your chances of business success because you work under a proven system. Franchises offer consumers consistency from a familiar brand.
  • Help Getting Started: Before even opening the business, the franchise offers support. This support comes in the form of site selection, design, construction, financing, training, and a grand-opening program.
  • Continued Support: The support continues after the business is open in the form of training, national and regional advertising, operating procedures, operational assistance, ongoing supervision and management support, increased spending power, and access to bulk purchasing.
  • A Fast-Track to a New Field: You can enter an entirely new industry without having to go back to school. The franchisor will teach you how to do everything and tell you everything that you need to know.
  • Lower Failure Rate: Generally speaking, franchises have a lower failure rate when compared to solo businesses. This is due to the fact that franchises are already proven to be successful and have a working concept.
  • Brand Recognition: As a recognizable brand, franchisees have a built-in fan base that new independent businesses simply don't have.

Disadvantages to Franchising

There are also disadvantages to franchising. These include:

  • Limited Control: As a franchise business owner, you have limited control. The franchisor is the one who provides the working system, so the franchisee has to follow it.
  • Costs: Opening a franchise is not a cheap endeavor. On top of the initial franchise fees and royalty fees, the franchisee is responsible for coming up with all of the capital to open the business and managing overhead.
  • Potential Leadership Changes: There is always the possibility that the franchise can be acquired and new leadership will move in.
  • Lack of Privacy: Being a franchisee also comes with a lack of financial privacy. The franchise agreement will likely come with a stipulation that the franchisor can oversee the entire financial ecosystem of the business.
  • Reputation Control: All it takes is one bad franchisee to upset the applecart and the whole franchise system can be tarnished.

Before diving into the world of franchising, there are various questions that you need to ask yourself:

Am I Willing to Take the Risk of Owning a Franchise?

Investing in a franchise can be a long and costly process. You can also fail.

What's Driving Me to Own a Franchise?

Look deep within yourself to understand why you want to own a franchise. Make sure you’re doing it for the right reasons and you have the skills to make the business work.

Can I Afford a Franchise?

As a franchisee, all of the capital to own and operate the business comes out of your pocket. You need to be in a good financial place to start a franchise business.

Do I Have the Right Personality for Franchise Ownership?

A franchise business owner should be a people-person. Franchisees have to manage staff, deal with customers and vendors, and get the message out about the business. A meek and shy person will find this difficult.

When is the Best Time to Invest in a Franchise?

The time to invest in a franchise really depends on the individual. It’s up to you when you want to take the exciting jump into business ownership.

There are pros and cons to franchising. Franchising comes with a built-in fan base, name-brand recognition, and the chance to be your own boss. On the other hand, being a franchisee comes with great financial risk, little financial privacy, and limited control. Before jumping into franchising, ask yourself serious questions about why you want to do it and seek the advice of a franchise consultant.

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IFPG Members at Top Golf

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