The Pros And Cons Of Franchising

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Opening a franchise can be an easy way to launch your own business without starting from scratch. But bear in mind that it’s not for everyone.

To know whether it’s right for you and your objectives, you need to understand better how to start a franchise and evaluate its advantages and disadvantages.

Therefore, if you’re considering buying a franchise, below is the list of its pros and cons.

PRO: Lower Risk

Owning a franchise has less risk of failure than launching an independent business. Franchising is a secure investment because well-established corporations have their support in it. They have business models that have already been tested and proven to be effective in multiple markets.

For that reason, this may also make it easier for you to access franchise loans to help you launch your business. The banks know that a franchise is a safer investment.

PRO: No Prior Experience Necessary

Launching a franchise business enables you to work in a field that you don’t have any prior work experience. The franchisor will provide proper training that ensures to establish the skills you need to run the franchise.

Plus, you may also consider talking to other franchisees about their experience to learn from their mistakes. Being a franchise allows you to pick up the gained knowledge and understanding of the previous owners, which will add to the odds of your success.

PRO: Powerful Brand Recognition

One of the challenges of starting an independent business is making loyal customers, which is why many people prefer to buy a franchise. One significant advantage of being a franchisee is the quick brand recognition that you receive.

It gives you access to a well-established customer base and potential candidate pool. Starting an already recognized brand can grant you an accelerated path to profitability, which means you don’t need to focus on marketing and advertising to build brand recognition.

PRO: Business Assistance

Another advantage of being a franchisee is the business assistance you get from the franchisor. Most franchisors prioritize helping their franchisees, particularly when they don’t have previous experience in the franchising field.

Your franchisor may provide you with pre-opening support with the way you should run the franchise, including the supplies, design, equipment, and advertising plan—everything you need to operate your business.

PRO: Easy Financing

Apart from the banks allowing you to lend money to own a reputable franchise, some franchisors have their funding department, which means they offer loans for people thinking of launching a franchise. But keep in mind that in-house financing might not always offer you the lowest interest rates.

In addition, even if some franchisors don’t have financial arms to provide loans for you or you’re thinking of lending from a bank, you’ll stand a better chance when you talk about buying a franchise with a good reputation.

PRO: Being Your Own Boss

Another significant advantage of owning a franchise is being your own boss with the additional benefit of getting assistance from previous owners’ and leaders’ first-hand knowledge and experience. You’ll be able to create a more manageable schedule, enjoy having freedom over your business, and you can also prefer to work from home.

Being a franchise owner opens you to many resources and opportunities, which you wouldn’t likely be able to do when you launch a business independently.

CON: High Start-Up Costs

The amount of money you need to start launching a franchise is one of the critical considerations you should have. Your initial investment may be higher than you expect. Therefore, while you’re doing your research, you should watch out for the royalty fees you’d have to pay every month to your potential franchisor.

You’ll likely have to pay some sort of continuous royalty fee after your initial investment. And the royalty fee is usually 4-6% percent of your gross sales revenue and marks a decrease in your earning potential.

CON: Less Flexibility And Creativity

Once you become a franchise owner, you have to follow the franchisor’s rules and abide by the terms of your end-user license agreement. For instance, you can’t reorganize things such as your products, the uniforms of your team members, and the decoration of your store. While it’s true that you are your own boss as a franchise owner, innovating and personalizing your business isn’t part of your responsibilities.

Conclusion

Like other businesses, buying a franchise has pros and cons. To find out if franchising is a good business for you, you should make sure to do your research. And once you’ve decided to start a franchise that’s fit for your objective to accomplish business growth, you should consider hiring a franchise attorney or consultant who can provide you with insights and advice.

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