If you’re thinking of starting a new business, one of the options that should be considered is a franchise. There are all kinds of franchise business opportunities out there. According to the International Franchise Association there are is an estimated 8 million people who are employed in a franchise outlet in the United States. Approximately 1 out of every 12 retail businesses is a franchised business. But is a franchise business right for you? Let’s have a look at the pros and cons of acquiring a franchise business.
The Pros of Acquiring a Franchise Business
- Brand Name is one of the biggest benefits to buying a franchise business. You don’t have to brand your business or your products. For example, if you buy a McDonalds franchise everyone knows what food products you sell and what they can expect from you.
- Turnkey System means they systems have all been fine-tuned and a working model is in place. If you have weak marketing or sales skills you can really benefit from a turnkey business because it comes with a proven system for running the business and generating sales.
- Franchise Support means you always have someone to answer your questions a luxury most small businesses do not have. With a franchise you are in business for yourself but you are not in business by yourself.
The Cons of Acquiring a Franchise Business
It’s only fair that we look at the downside of a franchise business too.
- Higher Startup Costs because you are paying to receive a business plan that works and you are also required to build your business to their specifications, which is why all franchise businesses, have a similar look. An independent is likely to be more careful with startup costs.
- Royalty Payments mean that you are going to give a percentage of your profits back to the franchisor. How much depends on the agreement. This is the cost to you for having support and national advertising.
- More Restrictions because you are required to conform to their operating procedures, their requirements for how your store will look, and even what your staff will wear
A franchise isn’t for everyone but it is a good option for individuals who like to work in a team environment and who may not have a strong business background but still want to own a business. For others the idea of all the restrictions and giving away even a small percentage of their profits leads them away from franchise opportunities and down the road of being a true entrepreneur.
There are a number of excellent franchise resources online that are worth spending some time reading to get a better understanding of what it means to own a franchise. It’s also important to remember that every franchise is different, which means there is likely the right match for you out there. It just may take a little bit of detective work to find it.
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