Franchising Pros and Cons


Last week’s question from Anthony R. on the way to choose the franchise that might best fulfill his life-long dream of owning his own business sparked variety of emails from other readers eager to offer their two cents on the topic .

Some folks offered helpful insights and suggestions on the way to pick a franchise and a couple of things to observe out for, while other emails came from current franchise owners asking me to assist them sell their operations to Anthony R.

Hmm, seems like it is time to update the old card once more . Tim Knox: Franchise Broker At Large… Who knows, maybe I can franchise the concept.

Last week I promised we’d take a better check out a couple of of the items you ought to search for when considering a franchise opportunity. confine mind that there are thousands of franchise opportunities that range from the low end opportunities available for a couple of thousand dollars to the high end franchises that cost many thousands of dollars.

The difference in price is reflected in many ways: the viability of the chance the extent of coaching and support offered to the franchisee, the diary and financial stability of the franchisor, the success rate of the franchisees, and a dozen other factors.

All a lower end franchisor might offer may be a training manual and therefore the right to use their name . Many even have little or no interest in removing potential franchisees. the reality is many are in business just to gather franchise fees. they need little interest in whether or not a franchisee actually succeeds. If you’ve got a pulse and a checkbook, you’ll become their franchisee. And your pulse doesn’t need to be that strong.

The higher end franchisors have very strict franchisee requirements and can not allow just anyone to become a neighborhood of their franchise system. They also attend much greater lengths to make sure the success of their franchisees. they provide complete hand holding from start to end and remain heavily involved within the business even after the doors open. Yes, you are doing pay dearly for his or her assistance, but because the old saying goes, you get what you buy .

Here are a couple of things to seem for during a franchise opportunity:

Turnkey operation

This is the foremost appealing feature of the many franchise systems. Many of the highest franchisors will scout the simplest location for the business, build and equip the power , hire and train employees, put you thru an in depth management training system, then toss you the keys. Furthermore, they’re going to work closely with you for the primary few months to assist make sure that you simply know what to try to to with the keys once they have been tossed to you.

The majority of franchises don’t offer such complete turnkey packages, so be prepared to try to to much of the upfront work yourself. Often it’s up to you to seek out a location, negotiate the lease, build out the space or erect a building, install the equipment, hire and train a staff etc.

Proven diary and management system

As mentioned earlier, many of the lesser-known franchise systems provide you with a training manual, maybe a training video, and a couple of hours of telephone support. Not the simplest thanks to find out how to run a business. an honest franchisor will provide you with thorough management training, either at their facility or onsite at yours. Since one among the explanations for purchasing into a franchise system is to tap into their expertise and know-how, thorough training should be a foremost consideration.

Customers expecting the door to open

I don’t have the statistics in my pocket to back this up, of course, but I’d bet the farm that each time a replacement McDonald’s opens its door, it is a mere matter of minutes before the primary Happy Meal is sold. Many franchisors spend many many dollars on national ad campaigns to market brand awareness. This works great for the franchisee who can literally have customers expecting the doors to open on the primary day of business.

Always consider the downsides

There are downsides to franchising. Foremost is that the high cost of entry. the highest franchise opportunities require considerable investment on the front , usually more of an investment than if the entrepreneur started an identical venture on his own. you’ll open an independent hamburger nutriment restaurant for a fraction of the McDonald’s franchise fee, but you almost certainly won’t sell as many hamburgers. What you’re buying from McDonald’s isn’t just a quick food restaurant that sells hamburgers. What you’re buying may be a brand, a reputation, and a proven business system with able to eat customers. Be prepared to pay a premium for it.

Another downside is that once you invest a franchise system you regularly need to pay a percentage of your revenues back to the franchisor. you would possibly even be required to shop for supplies from the franchisor, including inventory, paperwork, software, computer systems, and anything the franchisor decides that they ought to supply to you.

And there in lies the most important downside of all. once you invest a franchise system you do not control your business, the franchisor does. you’ve got little or no say-so in running the business. you want to follow their processes and procedures without variation. and will you opt to urge out of the business you’ll not even be allowed to sell the franchise to only anyone. The new owner would need to be approved by the franchisor before a deal might be made final.

The bottomline, Anthony, is to try to to your homework and confirm the franchise you select fits your personality, your lifestyle, and your pocket book.

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