Should You Open a Franchise? The Pros and Cons
Did you know every 8 minutes a new franchise outlet opens somewhere in the U.S.? Or that one out of every 12 retail stores are a franchise?
If you’ve been thinking about opening a new franchise outlet, we’re here to outline the pros and cons for you!
Franchise Outlet Pros:
- Brand Name: By acquiring a franchise not only are you acquiring the established brand name but also the customer base. The strength of the brand and loyal customers are by far the biggest advantage of owning a franchise.
- Low Inventory Prices: Franchisers often have long standing relationships with suppliers for all the materials needed. This means a lower cost for franchisees (you) when purchasing inventory and equipment.
- Franchise Support: There’s a saying in franchising, “You’re in business for yourself, but not by yourself.” Small business owners typically have very little support but by buying a franchise you have a full network of support right from the start.
- Easier Recruiting: Because your business has a recognized brand name, you are more likely to have a stronger recruiting pull with potential employees than an unknown company.
- You are your own boss: Many executive-level employees who experience downsizing or unfavorable work conditions decide to start a franchise. A top reason why: you’re the boss and you’re in control of running the business how you see fit.
- Reduced Risk: For all the reasons listed above, starting a franchise is much less risky than starting a business from nothing. The more established the brand name, the better off you are likely to be.
Franchise Outlet Cons:
- High Start-Up Costs: A well-established brand name franchise can be very expensive to buy into. Initial start up costs and a franchise fee can be significantly more than it would cost to start your own private business.
- Royalty Payments: Each year you are required to make royalty payments, usually a percentage of your annual or monthly gross income, to your franchisor. This is in return for support in operations and advertising.
- Limited Flexibility: Many franchise contracts have very formal operating procedures and rules. This allows very little or no alterations to brand assets so that there is a uniform experience for customers. You must follow their rules, whereas an independent business owner is in full control of business decisions.
- Dependency on Franchisor: Unfortunately any and all bad publicity of your franchise brand can directly affect your business.
A lot of time, effort and research must go into deciding if the franchising is right for you. It is not a decision that you should make over night. The upside of franchising can be huge, but some business owners want more control over the brand than franchising will allow.