Pro’s and Con’s of Owning a Franchise Business

January 20th, 2009 • Related • Filed Under • by admin

If you’re thinking about starting a new business, it’s natural to wonder if going with a franchise operation is the right choice. As with any decision, there are both positive and negatives associated with opening a franchise. It’s important to fully consider whether or not this type of business is your best option or not.

Potential Drawbacks

Start-up Cost – Many franchises require a fairly significant investment on the part of new franchisees. For some entrepreneurs, this cost factor is somewhat prohibitive to buy a franchise. The initial investment required varies greatly from one franchise operation to another, so be certain that you know all the facts before you decide whether or not to purchase a specific franchise.

Ongoing Royalty Payments – When you operate a franchise business, you’re required to pay royalties, typically in the form of a percentage of sales, to the corporation. This amount will be required the entire time you are in business, and as you become successful it can be quite significant.

Adherence to Policies – Because companies that sell franchises are concerned with protecting the integrity of their brand, they are very strict about enforcing policies. As a franchisee, you’ll be obligated to use company marketing materials, wear standard uniforms, use specific packaging, and more. Even though you’ll own your own business as a franchise owner, you’ll have to give up some decision making autonomy so that you can remain in compliance with corporate standards.

Potential Advantages

Recognized Brand – There’s a good chance that consumers will already be familiar with your brand when you open a franchise business. Name recognition can play an important role in how interested consumers are in checking out what you have to offer.

Benefit of Experience – When you start a franchise, you’ll be able to benefit from the past successes – and failures – of those who have started the same type of business as you. You’ll have access to expertise from corporate headquarters as well as from other franchisees in different markets.

National Advertising – As part of a franchise, you’ll likely enjoy the benefits of national advertising campaigns. Because advertising costs can be split among multiple franchisees, you’ll be able to get more “bang” for your marketing buck as a franchise owner than if you were a truly independent small business owner.

Marketing Support – Another main advantage that franchise owners have is the ability to participate in company wide marketing promotions. Many franchise operations have extensive national advertising programs, which of course benefit franchise owners everywhere. Most small business owners couldn’t afford this level of advertising support on their own.