Is a Small Business Franchise The Answer?

Ever thought about starting your own business, but can’t decide what business to start? Buying a small business franchise could be the answer. But before you jump head long into franchise ownership, you’ll want to carefully weigh the pros and cons of buying this kind of business. Below is a short list to get you thinking about the positives and negatives of buying a franchise.

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Immediate Brand Name

A definite benefit of buying a franchise is the brand name that goes along with it. Most likely you will not have to build awareness of your product or service with the target market as the franchiser will have built that over time for you.

Support Structure in Place

Usually the franchiser has support available for the new franchisee. This support could be help with hiring, daily business operations, coaching, mentoring, training, or a host of other support functions to help you be successful running the business.

Established Customer Base

Most franchises are business that have been operating successfully for some time. They have a time tested product or service and have an established customer base. When you buy a franchise you leverage the businesses hard work in acquiring a customer base so that you do not have to build up clients from scratch.

Leveraged Marketing

When you buy a franchise you’ll also be getting all of the marketing benefits of the franchiser. There is usually a fee for this, but it is much less than you would expect to pay if you were initiating the marketing campaign yourself. For example, if you buy a Subway sandwich shop all of those advertisements on national TV will be bringing business your way. As well as this, leveraged marketing means you wont have to spend time keeping track of marketing activities, and therefore you save on subscriptions to programs like Sharepoint or Microsoft Project whilst still improving your productivity.

Reduced Risk

Your risk is reduced due to the many pros listed above. When starting a business on your own you need to build everything from the ground up, establish your support networks, do your own advertising, and hope to capture a customer base…when you buy a franchise many of those things are already in place, and your chance of failure is reduced.

Less Freedom

You will certainly have a set of rules to live by when you buy a franchise. You may not be able to offer sales, incentives, or do your own marketing. Your actions with your business will be governed by the rules set forth in your franchisee contract that you sign prior to taking ownership.

Large Startup Cost

Buying a franchise can be expensive, and can require a large amount of capital up front to purchase. The stronger the brand name of the franchise you want to purchase, the more cash you’re going to have to come up with. Franchises can run anywhere from $10,00 to hundreds of thousands depending on the brand and strength of the franchise. Also you may be required to show a certain level of financial stability personally before you are able to purchase the business.

Dependent on Franchise Success

Your success as a business owner largely depends on the success of the franchise. Their actions, or poor business decisions will have a trickle down effect on your business. If a Subway in New York has and e. coli breakout , your business in Los Angeles will be affected. Same can be said if Subway decides to stop advertising, or begins to make questionable corporate decisions that affects public sentiment.

Locked in by Contracts

You will contracted to some extent by the franchiser. This could include a long term operational contract where you will be, in essence, required to remain in business even if you find out the business isn’t right for you.

Franchise Expense

Not only do you have the up front cost to buy a franchise, you will have many ongoing cost as a result of being a franchisee. Royalty, or a percentage of your profit, is usually paid to the franchiser. Advertising, and marketing expenses are usually passed along to the franchise owners, and other operational expenses could make their way into being your responsibility.

Do Your Homework

There are a host of resources on the internet for those of you interested in buying a franchise. A simple Google search returns a myriad of information, on any franchise you can think of. Be sure to do your homework on what it takes to start a franchise, franchising options available, and have an understanding of the pros and cons of buying a franchise before you jump in.

Seek Advice

When buying a franchise you need to fully understand the contracts and agreements that go along with it. If there is anything in the process you don’t understand, be sure to seek legal advice from a trusted source before you sign anything.

Make Sure the Franchise Fits You

Buying a franchise, or any business for that matter, is not much different than deciding to start your own company. Making sure the franchise fits your interest, personality, and is something you can be passionate about. This will go a long way in ensuring your continued success after you’ve signed the final papers.