Considering buying a franchise? Many entrepreneurs look into franchising as a way to enter a competitive market or to become a business owner without having to build something from scratch. However, franchises aren’t without their challenges. These are some of the biggest pros and cons of buying a franchise.
Pro: You can skip the startup stage
One of the biggest benefits of purchasing a franchise is avoiding the most difficult steps of starting a business.
Most small business owners report that finding financing is the biggest hurdle to getting their company off the ground. Approaching a venture capitalist or bank for a loan involves writing a business plan, conducting market research, working out financial projections, and then getting your first customers through the door. Franchisees get to skip those initial steps and get right to serving customers with a business model that’s been proven to work.
Con: High startup costs
Despite the advantage of skipping ahead in the process of launching a business, franchises still tend to be capital-intensive ventures.
According to The Balance, many franchises require potential partners to make an initial investment of anywhere from $5,000 - $1 million. You will also be required to have a minimum net worth, liquid cash available and good credit, the site says. Choose your franchise opportunity carefully, too — the bigger the brand, the more expensive your investment requirement will likely be.
Pro: Access to support and training
Franchises succeed in large part because they make their model easy to follow and replicate. Many franchises use training to help new partners and employees learn how the business works. In addition to training on things like daily operations, opening procedures and in-house technology, you may also access professional development programs.
Midas Auto Repair, for example, offers ongoing industry training as well as help with marketing, business management and customer relations. This support can mean the difference between success and failure: In one survey, 89% of small business owners who didn’t have a mentor in their first year wish that they did.
Franchises succeed in large part because they make their model easy to follow and replicate.
Con: No control over reputation management
Mentorship, training and professional development is great; but when something at the parent organization goes wrong, it can have significant negative repercussions for all franchisees.
Case in point: When Subway’s spokesperson was arrested in 2015, the company’s franchisees fell by 1,221 between 2015 and 2017. The damage to the national brand clearly impacted the franchisees, many of whom were forced to shutter their doors in response to the public backlash. Buying a franchise puts many small business owners in the precarious position of both being part of a local community, with regular customers and their own personal relationships, while still being part of a larger brand identity.
Pro: Built-in marketing and advertising plans
Marketing and advertising are added bonuses to buying a franchise. Many small business owners pull a double shift as both the owner and the CEO.
However, according to one survey, 47% of small business owners aren’t sure if their marketing efforts are making a difference. Luckily, buying a franchise puts the organization’s proven marketing and advertising tactics in your tool kit. Take out the guesswork and let your company grow with the brand’s built-in resources.
Con: Limited flexibility to build something yourself
Some small business owners see this marketing playbook as a disadvantage. While it’s nice to get helpful support and training, a big disadvantage of buying a franchise is that you must follow the rules.
Some franchisors micromanage or control the franchisee to a high degree. Depending on the contract, a franchisor may mandate details such as the business’s physical location, hours of operation, pricing, signage and layout, and resale terms. Entrepreneurs seeking to bring some personal vision into their franchise need to be aware of any inflexible restrictions in the franchise agreement before signing on.
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