Pros and cons of owning a franchise

0

Many people who want to get into their own business consider a franchise type business as a relatively ‘safe bet’, as franchises generally have an established brand, business model and support structure.

However, owning a franchise business is the same as owning any other business: there are no guarantees of success, no easy way to profits, no easy management processes, and can cost a lot in terms of buying the franchise, setting up the business, and ongoing fees and charges. Then of course there are the costs associated with the business premises, staff wages, stock, and so on. Typically, buying a franchise involves financial outlays upfront, which can be significant, so prospective franchise owners need to be confident that this type of business suits their aspirations, financial position and business outlook.

Pros:  Franchises are normally turn-key businesses. Branding, premises design, marketing and systems are well established. The new owner/s follow an established formula and can be up and running soon after committing to buy the franchise. One real advantage of owning a franchise is that the business may have the backing of a much larger organization – and the product is normally tried and tested in the market. Conversely, in a non-franchised business the owner can be solely responsible for every aspect of the business: development, branding, marketing, etc.

Cons:  The disadvantages of owning a franchise relate mainly to the type of person you are and the level of financial investment required. There are no easy businesses to be in, just different challenges in making and sustaining a profitable business. You may not like the restrictions placed on franchise operators – having to follow established norms without deviation so that the product is the same regardless of the outlet.

Having to pay a percentage of revenue to the franchisor can also impact significantly on the business, especially if revenue levels don’t meet expectations. Remember this is your business – and if it’s not profitable then obviously it’s your risk. Ask yourself. ‘does this really stack up as a good business with real prospects for growth and profit, or is it just buying a new career?’

Summary:  The bottom line is that success in a franchise, as with any business, rest with the owner’s capacity to ensure there is a market for the product or service, that the business volume is sufficient to make a profit, and that the business is managed effectively according to a formula established by the franchisor.

Share.

Leave A Reply