Ready To Become A Franchise Owner?
Here Are Some Things To Consider First
A lot of people have a BIG dream – to own and operate their own business. I’ve found this to be especially true for corporate employees who have been downsized – outsized – upsized in their current careers.
Feelings of being undervalued and underappreciated combined with exceptionally high-stress levels, strained relationships with upper management and misalignment with company culture drives people to question their options and what’s really possible for them in their chosen field.
Owning your own business and having the ability to do things “right” is a highly compelling reason to consider owning a franchise. And, while it’s proven to be a fantastic opportunity for many people, it may not be the best fit for you.
Research conducted by The International Franchise Association shows that franchise businesses create jobs faster than other companies. And, the outlook for franchise success is very positive right now because our economy is robust.
So, I want to talk about some of the things you need to think about before diving into franchise ownership head-first…
Advantages Of Owning A Franchise
A Proven Turnkey System
A successful franchise system provides you with a tried-and-true system for operating a business and generating profits.
Marketing and Advertising
Some franchise opportunities provide national advertising campaigns as well as marketing materials. Franchisees are typically required to invest a certain amount in local marketing and advertising. And, the franchisor is often willing to help out to make sure the brand’s message is consistent, and there is a good return on the Franchisee’s marketing and advertising spend.
Franchise Support Network
Owning a business is not easy. Things happen all the time, and many small business owners struggle because they don’t have a reliable support network to tap into when they need expert advice. Owning a franchise provides you with access to seasoned business owners who are facing or have dealt the same problems as you are so you can get the information and guidance you need when you need it most.
Brand Name Franchise vs. “Hot New Franchise”
Established franchises provide a recognized brand name and market awareness to franchisees, which can attract customers. The most significant benefit of a brand name franchise is that the business model has been proven over time, through different economic climates. It’s a business that’s grown in good economic times and in bad. “Hot New Franchises” may end up thriving in the long run, but in the beginning, they don’t have a proven track record of sustainability and profitability.
Leveraged Purchasing Power
The collective purchasing power of a franchise group helps lower the cost of purchasing inventory and equipment. Independent businesses typically have limited bargaining power with suppliers.
Recruiting and Training
Good employees are the cornerstone to success for all businesses. A brand name franchise will usually have established recruiting and training programs to help business owners attract and retain the best talent.
Disadvantages Of Owning A Franchise
Higher Start-up Costs
Buying an established brand name franchise is often more expensive than starting a business from the ground-up. Many franchises require an initial investment of anywhere from $5,000 to over $1 million. Other requirements may include a minimum net worth, liquid cash on hand, and good credit. While an independent start-up may be financially doable, it can be far riskier because the business model hasn’t been tested and proven yet.
Ongoing Franchise Royalty Payments
Each year franchisees are required to make royalty payments to the franchisor in exchange for operational and marketing support from corporate headquarters.
Less Privacy, Freedom, and Flexibility
Franchising is based on conformity and uniformity, not necessarily freedom. As a franchisee, while you are the boss of your location, you do not have absolute control over everything in your store.
You are expected to follow corporate directives. Franchise agreements give franchisors the power to change their required procedures, alter the product line, and they can even require franchisees to make purchases to be in compliance with new directives.
Franchisees are required to share their financial information with the franchisor.
Not All Franchises Are Created Equal
Some franchisers may not provide the necessary resources you need to experience success at your location. Some franchisers will make promises of ongoing support and not provide it. Be sure to do your research and speak with other franchisees for feedback about the kind of support, training, and help you can expect.
It’s Your Bottom Line
Choosing the right franchise for you and your goals is imperative. And, it helps to work with someone who knows the ins and outs of doing franchise due diligence. That’s where I can help.
I’ve been a franchise owner myself, and because of that hard-earned experience, I have access to insider knowledge that I am happy to share with anyone looking to own a franchise. Just let me know when you’re ready to chat.
I’d love to hear from you now.
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If you have any questions at all, please post them in the comments or send them to me at Todd@TheFranchiseConsultingCompany.com. I’m more than happy to help if I can.
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