When buying a franchise, the process can be overwhelming for some people especially if it’s your first time being an entrepreneur or owning a business. There’s a lot of things to consider and too many times, eager franchise buyers jump in way too soon and they make mistakes along the way.
But it doesn’t have to be that way. There’s a lot of great information available for people to make informed decisions. You could talk to other franchise owners and see what they have to say about their business. You could, and should, go meet the leadership at the headquarters. You could also read this post as another way to get great insight. So just for you, here’s 6 pros and 5 cons that you can use when doing your due diligence.
6 Pros: What Specific Benefits Does Buying A Franchise Offer?
1. A business concept with a track record for success – The whole purpose of using a franchise business model is that you’re buying a proven system that produces predictable results.
2. Name recognition for the business – Do you think if you had a name like McDonald’s or Subway on your front door when you opened up your business, you’d have a good chance to get customers?
3. Management training – This part is so overlooked because so many entrepreneurs and business owners go into business without a plan and without any training. The training requirements are so valuable to the franchise owners.
4. Access to proprietary methods and/or processes used in the business – This right here is HUGE! From day 1 you have cutting edge systems and technology right at your fingertips that you didn’t have to invent or put any resources in to. This is something most business owners never consider.
5. A ready-made business or marketing plan to follow – The whole point again of the franchise model is that it’s been proven to work already. The roadmap has already been done so all you have to do is follow it.
6. Ready-made ads, brochures, and other sales and marketing aids – This is another huge time saver as you just have to pay for what you need and you’re ready to go. On top of that, marketing and stuff like this has a certain creative element to it. If this isn’t your strong suit, you’ll love this.
Buying A Franchise Cons: What Are The Disadvantages?
1. Start-up costs can be high – The average initial franchise investment is $250,000 which excludes real estate. Ouch.
2. You MUST follow the franchisor’s rules – If you have a great idea or you can make a better widget, it won’t matter. You have to stay within the rules and guidelines that the franchisor sets or you could easily lose your franchise. It’s that serious.
3. A percentage of your sales and/or a flat fee must be paid to the franchisor – The average monthly royalties paid to the franchisor range from 3% to 6% of the gross monthly sales, not net profits.
4. Your success is dependent on the brand, talents, foresight and stability of the franchisor – You don’t have the control to make changes that might need to be made to become successful. Ultimately all the decisions rest on the expertise and business skills of the franchisor, not the franchise owner.
5. Whether your operation is successful or not, you are locked into the terms of the contract with the franchisor – Let’s say you have a car wash franchise and it rains for 14 straight weekends which ultimately kills your business. It doesn’t matter. You still have to make your minimum payments or fees to the franchisor even if you’re not making any money.
Bottom line is buying a franchise is ultimately your choice. You must factor everything into your decision, but if you understand all the pros and cons before you make your decision, it will be much more calculated and you can easily accept all terms and conditions that may apply.
To your dreams,
