Should You Look at a New Franchise, or Go with an Established Company?

When you are starting a franchise an important question arises; should you go for the established franchise opportunities or give the new players a look? To help you, here are some pros and cons of new and established franchise business for sale offers.

New franchise opportunities

Pros

• If the concept is new in your area, you will get a head start.
• You may get a larger territory and better choice of market in a new franchise business for sale offer.
• Sometimes, the franchise fee is much lower than the established franchise opportunities in the field. But don’t forget to compare other fees and costs as well.
• You can also bargain certain provisions in the franchise agreement to your favor, if you are an early franchisee of the franchisor.
• You can have more growth potential and hence, can get higher return of investment from a new franchise than an established one.
• You have excellent rapport with the franchisor, thanks to the small number of franchise units and as they grow, you can enjoy an exalted position among fellow franchisees. Many early franchisees also make it to the management of the company, as it grows in stature!

Cons

• The business model may not be that much developed in a new franchise business. That may hamper your progress.
• Another risk is that you don’t have too many past performances to judge the franchise opportunity. That is why it’s important that you go for new entries, which have operated at least one or more successful franchise prototypes.
• Getting financial loans becomes difficult, if you are starting a franchise of a new company. Also since the brand name is not developed, you have to spend more on the marketing aspect to promote your unit.
• Getting support becomes difficult, if the company hasn’t developed an extensive training and support system. That is why knowing the experience and qualification of the people in charge of the franchise operation is very important.
• Since the number of units are not that high, you won’t get the benefits established franchises have with the manufactures and distributors for their bulk purchase capacity.

Established franchise opportunities

Pros

• A distinguished brand-name that makes getting loans easier.
• A proven business model.
• Well-researched and thorough training and support system.
• Good discounts in lieu of bulk purchase capacity.
• More support during starting a franchise, as the franchisor knows what works in your area.
• The shared knowledge and experience of the existing franchisees and a mature franchisor can help you to avoid costly mistakes.
• Marketing becomes easy, as the brand-name is enough to get customers.

Cons

• Market of your choice may not be available.
• The franchisor will be stricter with rules and regulations and there will be no negotiation of any kind in the franchise agreement.
• Due to size, you may get lost in the “system”, especially if you are a single-store owner.

Weigh the pros and cons and then begin finding the top franchise of your dreams.

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