Benefits and Challenges of Owning a Franchise

As with any business opportunity, owning a franchise has both advantages and disadvantages.

The Benefits

1. Established customer base and recognizable brand

This is perhaps the biggest value that a franchise offers! You get immediate recognition by an existing customer base. A reputable franchise with a loyal customer base is very hard to beat. This prevents you from having to spend plenty of dollars in advertising to get your name and brand known. People already know who you are and what you offer.

2. Comprehensive Training

Most franchises offer comprehensive training and teach you everything you need to know in order to run the franchise successfully. They will offer training for management as well as technical training. Naturally, this training is far better and more relevant to your business than training that you would find on your own.

3. Marketing

Prepared marketing materials from the national chain will help a new local franchise get off to a good start. Not all franchises provide marketing support, but many do and it is significantly beneficial.

4. Reputable suppliers

Your franchisor has already done the groundwork and found ideal suppliers that have all the necessary items that the franchisee needs to conduct business.

5. Financial assistance

Some franchises offer financing, budgeting, and loan assistance in cases where you have good credit but are short of money!

6. Business support

The franchisor and many of your fellow owners are constantly available for questions, concerns, or advice. Therefore, you are never left out on your own! Many even provide a toll free helpline so that you can call for help whenever you need to.

7. Research and development

While you are running your franchise, your parent is constantly working on research and development of the product and brand, so that you can focus on operations and still receive the benefits of an developing business!

The Challenges

1. Royalty payments

Royalties are probably the toughest reality of owning a franchise. Your profit will be reduced each month because a percentage of gross profits are paid to the franchisor.

2. Sole Sourcing

Many franchise contracts require all the franchises to buy their supplies from approved suppliers. These suppliers may have much higher costs than others which results in reduced profits.

3. Franchise fee and startup costs

Sometimes it costs more to start a franchise than it would a personal business. However, this is not always the case.

4. Marketing fees

Many franchisors require that franchisees pay fees for marketing plans and materials. However, this is also not always the case.

5. Long-term contract

In many cases, franchisors require at least a 10 year contract. This can be quite a challenge if you find your franchise unsuccessful or not what you thought it would be.

6. Rules and regulations

For pure entrepreneurs, following franchisors rules can be challenging. Most franchisors don not have overly restrictive rules, but they also don not bend them very often!

7. Exposure to bad decisions by the parent

Finally, if something that your franchisor does creates a negative impression in the market or with the public, it will affect your franchise business as well. Unfortunately, you have no control over this and should take it into consideration up front.

As you have noticed, owning a franchise has an equal amount of advantages and disadvantages. However, it’s up to you to decide whether the pros outweigh the cons.

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