The Pros and Cons of Owning a Franchise

When people come to the point in life when they don’t want to work for someone else anymore, they start looking into working for themselves. A business opportunity that draws a lot of people in is the business of owning a franchise. Unfortunately, when people are excited about becoming their own boss and not having to work for someone else, they only consider the positive things that are involved in something like a franchise. But although there are many good things that are involved with having a franchise, there are also some things about having a franchise that people don’t consider. So we’ll take a look at the pros and cons of having a franchise, and hopefully you will be able to make an informed decision.

Pros of Franchising

Depending on the franchise you purchase, how long it has been around, and the reputation that it has, some of the benefits of purchasing the franchise would be:

• Awareness of the brand – For example, if you buy a restaurant chain like McDonald’s or Subway, you are going to know that people like the food that you sell and, if you have eaten there before, you’ll know what the products are as well.

• Support and training from the Franchisor – There are plenty of franchisors who are willing to take the time to give the new franchisees some hands on support and training.

• Discounts on supplies – Because you are buying in large quantities, you will find that one of the great things about having a franchise is that you have a lot of buying power and you’ll get discounts on the supplies.

• Getting together with others and sharing ideas – There’s nothing better than being able to get together with others who are in the same business that you are. You can share ideas, talk about problems that you have, and brag about your accomplishments. It’s nice to have a network of people who know what you are going through.

• There’s a really good chance for success – Franchising is a great way to make money, especially when you are the owner of a franchise that is well known.

• Experience – There’s nothing better than experience, and experience is something that is rewarding in its own right.

• Available information on the latest sector developments and Market research – Market research and knowing things about your sector is a great way to get to know your area and what people are buying.

Cons of Franchising

One thing about franchising is that even though you are working for yourself, you still have a parent company that expects consistency and results from all of their franchisees. So, if you have a Burger King franchise, for example, and you wanted the signs to say John’s Burger King instead of just the normal Burger King words on the sign, you would have to go to the corporate office and get approval for the signs to say John’s Burger King.

When you are deciding on a franchise to purchase, read the small print carefully to ensure that you are fully familiar with the terms and conditions and that you understand everything about the franchise. You should also know that some of the terms and conditions can be negotiated between you and the franchisor, so ask about something that you might want to change. You’ll never know unless you ask.

• The Risk Involved

When you are buying a franchise, you are putting a lot of trust in the franchisor. There is a trickle down effect when it comes to franchisees and franchisors – if the franchisor is having financial problems due to bad management, this could adversely affect your business. Like they say – a fish rots from the head, so if the top of the business is having problems, there’s a good chance that your business could suffer as well.

• Disagreeing with strategies

Some of the fees that you pay to the franchise are going to help pay for decisions that you don’t like or you don’t agree with. Even though you may not be in agreement with the franchisor about the things that are done to make the franchise grow or to help to fight the threats that your business runs into, like competition, you may find that while you have a say your opinion may not really count. When it comes to making management decisions, the majority vote usually wins. You may also find that what works for other people may not work for you, for example because of the location of your franchise. Unfortunately, this has little bearing on whether or not it will continue to be implemented. Usually if it works for the majority it will continue to be used.

• The belief that nothing bad can happen

One of the biggest mistakes that people make when they buy a franchise is that they don’t think anything can go wrong. They think that the money is just going to roll in with very little effort on their part, and they don’t require any management skills. Even though there are systems that are in place that will help lessen the impact of not having a lot of experience, there are decisions that will have to be made every day when you are running your business. Sometimes the franchisor of the business will sit down and make certain that you are well suited for the job before offering you the chance to buy the franchise. They know that if the franchise fails, for whatever reason, it’s going to be harder to convince people who might purchase franchises in other locations that it’s a good business. Of course, just because a franchisor sells you the franchise it doesn’t mean that they are completely confident in what you can do. Sometimes they just want to get a location sold.

• One bad apple spoils the bushel

When you are in a franchise, if there are problems with other franchises that are the same as yours, people tend to stay away from yours because they are afraid that you may have the same problems. Remember when Taco Bell was having problems? Because of one store, people stopped going to Taco Bell because they thought that they would run into the same problems there as well. And the sad thing is that the rumours don’t have to be true to cause a problem. If something is said about a franchise and the press gets hold of it, even if it’s not completely true, people are going to believe it and it will hurt your business.

• No say in where you buy supplies

Usually most of the franchisees buy all of their supplies from the same place – this isn’t necessarily because they want to but because it is written in their contract. When you own a franchise, for better or worse, you have to go by what the contract says and sometimes it says that you have to buy supplies from wherever the contract states.

• You are committed

If you don’t read your agreement carefully before signing on the dotted line and you find that you have made a mistake with your choice of franchise, you may be locked into that agreement for a period of years and you may find it impossible to get out of.

As you can see, there are a lot of good things about having a franchise, but there are also a lot of bad things that you have to consider. When you are looking into franchises, the first thing you should do is consider the area where you will have the franchise and figure out what is needed in the area. After all, if there are a lot of one type of fast food restaurants in that area, you are really taking a risk choosing that as your franchise because there will be a lot of competition.

Read over the agreement carefully and be certain that you understand everything about it. Once you have done these two things, decide whether or not owning a franchise is for you. It’s not for everyone, and you have to understand what is involved to really make an informed decision. Weighing all the pros and cons will help you decide whether or not owning a franchise is for you.