Franchise opportunities are usually proven, viable business models that the franchisor provides as a developed and supported way of doing business. Typically you are given ongoing guidance, access to operational systems and guidance in return for a periodic payment, one off fee or ongoing revenue share.
Buying into a franchise can be a viable alternative to starting your own business. The right franchise can be very lucrative and offer individuals extensive support from a wider group of experienced, successful peers and mentors. Listed below are some of the key advantages and disadvantages of buying into a franchise.
Advantages of buying a franchise
- Franchises offer the independence of small business ownership supported by a sizable business network.
- Experience is not necessarily needed for the franchise you buy into.
- Training is typically offered, giving you the skills needed to operate the business model effectively.
- It is common for franchises to see a higher success rate than independent start-ups.
- Finance is reportedly easier to obtain for a franchise.
- The start-up costs are typically lower for a franchise over a similar independent start up.
- You can benefit from an established reputation, brand, proven management and business practices.
- Access to national advertising, support and marketing material.
Disadvantages of buying a franchise
- Buying a franchise is a binding, formal agreement that you must fully consider.
- The agreement will typically dictate how you run the business which can limit your creative freedom.
- You can be assigned a tightly controlled operational area, product lines and supplier options.
- The performance of other businesses within the franchise can impact your business.
- You will have to share profits with the franchisor for the entire duration of the business agreement.
- Typically, the franchisor is not obliged to renew your agreement at the end of your term.
While on the surface franchising may seem a simple entry point into owning your own business but there can be many pitfalls and limitations. There is no guarantee of success and the fundamental principles of business operation still apply. There is no replacement for hard work, good decision making, time management and customer services.
Carefully consider all of your options and research your opportunities fully. Read the agreements, speak to customers and peers to glean honest feedback from a franchisor and customer perspective.