Franchise consideration pros and cons should be seriously evaluated by anyone starting a new business. Whether you have been in business before or not everyone should consider the franchise option.
If you are starting a new business by joining a franchise system it’s generally a quicker way to profit and success but you must conform to a set of rules set out by the franchisor.
If joining best join a reputable quality franchise. The franchisor will screen your application as they do not want to see failed franchises on their books and that’s a plus for you.
If you are a true entrepreneur with cutting edge technology or products a franchise will not be for you.
Franchise consideration pros and cons facts.
The information below is a guide to the franchise system and that will vary on the success of every individual franchise and the countries in which they operate around the world.
What are the pros and cons of going into a franchise versus starting my own business?
You need to do your homework and due diligence to avoid any costly mistakes you will regret.
Look into the franchise operation.
- As there are a wide range of models from the very structured to the less restrictive “laissez-faire”
- How long has the franchisor been in business
- Number of franchisees within the country or around the world
- How profitable and successful individual franchisees have been
- The depth of the franchisors penetration into the market segment
It is good to visit and meet with several current franchisees to see the pros and cons of the franchise.
Above everything go with a proven reputable franchise system.
#1. Pros of Franchising
You gain faster recognition, authority and trust by going with a successful name brand.
There are plenty of reasons people new to business who have limited business and industry backgrounds are attracted to owning a franchise business. A franchisee owns the business yet they have strong support from the franchisor.
Proven business model.
The better franchise systems have a turnkey instruction manual on all you need to know. These will include a complete operating system including benchmark marketing, operational and book keeping information.
You will be given the need-to-know training whereas a non franchisee will have to seek out training and that may not be totally relevant.
Your franchisor will assist in finding the right location and site selection. They will do the market research if they have not already done so.
Quality franchises have established brand recognition and awareness. They are forever building their reputation to reinforce sales with ongoing advertising to support their franchisees.
These are some of the successful franchises: McDonalds, 7 Eleven, Subway, Specsavers, Gloria Jeans, Dominos Pizza, Bakers Delight, Jims Mowing, Coffee Club and many more.
Joining the right Franchisor
By being associated with a reputable and well known franchise the new franchisee has a head start in business as you are half way through the marketing race by having brand recognition established for your business in the local market place.
Sales from your new Franchise.
Sales volume will be dependent on the franchise you have joined.
- Are you selling a well known product or service
- How often or popular is the product or service used
- Are you the exclusive or preferential buyer of that product or service.
A franchise business should get you to profitability and return on investment sooner and faster than a non franchise operation.
To keep business failure risk low your franchisor should be providing ongoing help and support.
By joining a franchise organisation you meet regularly with fellow franchisees to exchange ideas and gain knowledge from a very focussed event based about your business.
Selling your business.
You will always have a buyer of your franchise where as this may not be necessarily so when you don’t belong to a franchise organisation.
Selling price will depend on sales and profitability results. Your accountant is the best place to start when you are considering selling.
For those who are serious about franchising see the “Benefits of franchising in Australia” more here. In many other countries the information will also be relevant.
#2. Cons of Franchising
There are costs associated with joining a franchise but many of these costs (or be it in different areas) you would have in starting a standalone business.
- Joining fee – a one off fee to buy into the franchise
- Ongoing costs such as royalty, advertising and many other various
Starting your own business may be more affordable and long term franchising may be less profitable.
Limitations on independence
There are rules to follow and abide by and you will have less business privacy and freedom.
Belonging to a franchisee hinders innovation. So if that is your main focus do not consider becoming a franchisee.
Poor franchisor performance.
Your fellow franchisee can assist if within the organisation if there is no mechanism for the franchisee to make representation to the franchisor.
Sale of business.
Limitation may not be an issue as much as a non franchisee trying to sell a business on the open market.
Start Your Own Business is a 10 part series
- Part 1 – 9 Best Reasons to Start Your Own Business – Link
- Part 2 – Start Your Own Business What Field – Link
- Part 3 – Conduct a Reality Check on You – Link
- Part 4 – Franchise Consideration Pros and Cons – Link
- Part 5 – Reasons You Need a Business Plan – Link
- Part 6 – Free Help to Start Your Own Business – Link
- Part 7 – Choosing the Right Business Structure – Link
- Part 8 – Developing and Writing a Business Plan – Link
- Part 9 – Starting Your Business – Link
- Part 10 – Running and Monitoring you Business – Link
To Sum Up Franchise Consideration Pros and Cons
Whether you have been in business before or not everyone should consider the franchise option.
Franchise consideration pros and cons should be a serious evaluation by anyone starting a new business.