Even though buying a franchise can be less expensive than starting a business from the ground up, it still requires significant capital investment. In addition, running a franchise business requires a lot of hard work, and you must be prepared to operate your new business based on someone else’s rules. A franchise is a commercial and legal relationship between the franchisor (owner of a company) and the franchisee (an individual who is starting a franchise/branch of that company using the company’s business model and trademarks). Remember that the franchisee sells the goods and/or services that the franchisor provides.
Following, check out some of the pros and cons of buying a franchise so you can make a well-informed decision.
The Pros of Buying a Franchise
Regardless of the type of franchise — from fast food and hotels to automotive and hair salons — most franchises come with the following benefits:
Startup Stage Can Be Skippedraising funds for the business
Access to Training and Support
A franchise gives you access to an established, recognized and loyal consumer base along with a potential employee pool. It can also give you an expedited path to profitability by bringing in customers and prospective employees right from the start.
Marketing and Advertising Bonuses
In addition, you’ll receive valuable input and help from the franchisor on how to develop and execute effective marketing campaigns of your own. They may also provide a marketing plan that includes market research, strategies, sales forecasting and budgets.
Collective Purchasing Power
Easier Access to Financing
specifically for franchisesSBA Franchise Directory
Real Estate Resources
The Cons of Buying a Franchise
The franchise model isn’t without its challenges. Here are some of the most common ones:
High Startup Costs
Reputation Management ProblemsSubway’s pitchman Jared Fogle getting arrested in 2015death of the company co-founder Fred DeLucanumber of franchisees falling by 1,221
Limited Flexibility franchise owner
Some franchisors also tend to micromanage their franchisees to a great extent. Depending on the contract, they may have a say in such details as the business’ physical location, hours of operation, signage, layout, pricing and resale terms, among other things.
Contracts Can Be Tricky:
Buying a Franchise: A Consumer Guide