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The Pros And Cons Of Buying A Franchise

The Pros And Cons Of Buying A Franchise
The Pros And Cons Of Buying A Franchise

Starting a new business venture is not a decision that should be entered into lightly. Evaluating the best options for you personally should not be done overnight. Weighing up the pros and cons of entrepreneurship can be an exhaustive endeavour – there will be countless questions, queries and conversations.

One attractive option to consider during your entrepreneurial research is investing in a franchise.

As it is your time and money on the line, it is imperative that you consider the up and downsides involved in buying yourself a franchise.

With that in mind, to help you in your research, below we have compiled what we believe are the top five advantages and five main disadvantages of investing in a franchise.

Five Advantages Investing in a Franchise

  1. A lot of the work required to launch a business venture has been done. The products and/or service will be well established and tried and tested. This will include an easily recognisable brand, logo and trademarks. The franchisor will gain access to valuable pre-existing knowledge and data good, and given insights to what locations and demographics work best for their system.
  2. Not as much, if any, experience is required. The training programmes provided by the franchisor are typically extensive and will assist franchisees gain or hone the skills needed to successfully operate their chosen franchise. A lot of franchisors offer ongoing training at the franchisee’s request.
  3. Support from a larger network of businesses. Not only do you receive support from the franchisor - training, operations manual, additional ongoing advice etc. - you can also avail of support from other franchisees within the network. Conventions, meetups and meetings are regular occurrences within franchises.
  4. Utilising the collective buying power of the franchisor. Often, the franchisor has cultivated relationships with suppliers that facilitates its franchisees to buy goods at lower prices in comparison to independent owners in the same market.
  5. In many cases, finance may be made easier to secure. Banks and other lenders can sometimes be more willing to lend money to those investing in a franchise due to an existing knowledge of the franchisor’s product or service.

Five Disadvantages of Buying a Franchise

  1. Less flexibility than establishing a business on your own. Some franchisors exercise a level of control that you might find restricting. Franchisees can face restrictions on where they can sell their products or services, as well as requirements on approved suppliers or opening hours.
  2. Except in rare instances, profits must be shared with franchisor. Royalties, a fee for the continued use of the franchisor’s trademarks and patented processes, will be required to be paid to the franchisor regularly. However, there are some franchises that don’t require royalty payments.
  3. Set rates for certain business expenditures. You will probably have to spend money on advertising or equipment, whatever the business you own, but with a franchise relationship these costs will be set by the franchisor. There’s no divergence for your personal preferences or individual situation.
  4. Business reputation is impacted by others who also run the same franchise. If another franchisee in the system performs poorly, it may have a negative impact on your business by potential customers not giving your business a chance.
  5. Franchisors, by and large, hold the majority of the renewal power. Most franchisors that offer renewal rights, will renew a franchise if the franchisee is in good standing. Nevertheless, this status is at their judgment. This status is often defined by a set of conditions outlined in the franchise agreement. Among other things, some common requirements for renewal include providing the franchisor sufficient notice of the desire to extend, payment of a renewal fee, updates to the premises if there is one.

No business method or industry sector guarantees success—and franchising is no exception. Although many industry experts claim that franchising is the common-sense approach to business ownership and that if offers a better chance of success, when compared to going it alone.

If you’re seeking steady support and guidance in the systems of your business, a franchise might be the perfect path to business ownership for you.

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