Franchises: To Buy Or Not To Buy?

It is often assumed that buying a franchise is an easy way to make money when starting your own business. While this may be true for some, not all franchisors are created equally, and not everyone is cut out to be a franchisee. So, what are the pros and cons of having a franchise, and what can a prospective franchisee expect from this process?

The Pros

Increased Success Rate
When you buy a franchise, you acquire an existing brand with a proven track record. Their products are already in the market, having been thoroughly tested, and they have established systems in place. This reduces some of the risks associated with starting a new business, making it more likely that you will succeed. Statistics show that franchisees have a significantly better chance of success compared to those who start their own businesses from scratch.

Being a franchisee also means you are in a better position to attract customers because your brand is already well-known. There is an existing pool of customers you can tap into, reducing the need for extensive marketing efforts to convert potential customers.

Ongoing Support
A major advantage of owning a franchise is the substantial initial support you receive when setting up your business. You also benefit from ongoing guidance and assistance in managing daily operations. When you buy a franchise, you typically receive all the necessary hardware, stock, and training to get your business started. Often, you can access these resources at a reduced cost, as franchisors usually have established bulk-buying agreements with suppliers. This support can significantly reduce the stress of starting a new business.

The Cons

Little Room for Change
One of the biggest frustrations for franchisees is the lack of flexibility in how you run your business. Franchisees are required to follow strict guidelines from the franchisor, leaving little room for creativity or individual business strategies. This can be particularly frustrating for entrepreneurial thinkers who want to innovate and explore new approaches to business.

Franchise Fees
The initial investment required to buy a franchise can be quite expensive, especially for well-known brands. You will need your own capital, and you may also require additional funding from lenders. Beyond start-up costs, franchise fees—typically calculated as a percentage of your monthly turnover—can be one of the most significant ongoing expenses.

Highly Competitive
Investing in a franchise that isn't well-known carries inherent risks. Just because a business offers franchises doesn't guarantee its success. With many franchisors competing for ownership, it’s crucial to thoroughly understand the business you are considering and ensure it is a sound investment.

The Bottom Line
Buying a franchise can be an excellent way to own your own business, but it comes with both pros and cons. It's essential to conduct thorough due diligence and understand who you are partnering with. If you are suited to being a franchisee and choose the right company, franchising can be a strategic pathway to entrepreneurial success.