If you have any kind of entrepreneurial streak, the idea of buying a franchise might seem really alluring. For many would-be entrepreneurs, it offers the perfect chance to be your own boss without taking on a significant risk associated with starting a business. However, there are also some disadvantages to it like significant monetary investment, and others alike. Do you really think buying a franchise is a wise decision? Are you facing a dilemma when deciding it?
Well, we are here to assist you! Read on the advantages and disadvantages associated with buying a franchise, weigh them, and make an informed decision.
Pros of Franchising
Buying a franchise provides you with an opportunity to work in a field that you don’t necessarily have experience in. And, this is intriguing to you! By entering into an already established brand you are able to gain knowledge, experience, and industry secrets. Nonetheless, you get to be your own boss. That being said, have a look at some other benefits of franchising below.
- Lower Business Risk Involved
Franchises are known to be a more secure investment than new businesses since they have the support and backing of large corporations. These franchises have business models which need to be tested across different markets and have already proven to be effective. Hence, it is easier to start a franchise than obtaining a loan for any new business.
- Loyal Customer Base and Brand Recognition
Finding your first customers is one of the hardest parts in any business which is why more people turn to franchising. When you buy a franchise, you get to bypass a lot of work that goes into branding and marketing a new business. Hence, allowing you to tap into an already established, loyal customer base, and employee pool. In addition, if you invest in a known brand, you already get to walk on the path of profitability by bringing in customers from the start.
- Collective Buying Power and Extensive Franchisor Support
Another benefit associated with buying a franchise is that you are benefitted from the franchisor’s deep-rooted relationships with the suppliers. This means the materials/products will be less expensive for you due to the collective buying power of the franchisor.
Apart from that, most franchisors prioritize supporting their franchisees, especially when they are just starting out. They do it by different means like offering them pre-opening assistance with operations like site selection, design, construction, financing, training, and grand-opening programs. While some work from home franchise which even grants loans and other forms of financial assistance.
Cons of Franchising
Despite some really good advantages extended by franchising, there are some drawbacks associated with it too. Read on to know!
- High Initial Investment
Yes, that’s right! The initial investment amount can be hefty depending on which franchise you choose to invest in, especially for large corporations. However, there are an assortment of franchises available that are affordable for any budget. Do your research well and watch out for the monthly royalty fees that some franchisors charge their franchisees. The royalty fee is typically 4 - 6 percent of your gross sales revenue and marks a reduction to your profit potential.
- Limited Creativity
There are creative limitations for franchises because they already have a predetermined brand who is looking to alter or make additions to their company’s brand. Those who are looking to explore and enhance their creativity might be disheartened as there are restrictions placed on your operational area, the products you can sell, and even the suppliers you can use because of the predetermined business model.
Deciding to buy a franchise is a tough choice. Hope we were able to simplify it for you with the aforementioned points. Make sure you do your research well. If you feel all this is worth the investment, go for it! Towards the end, plan to choose the one which interests you the most be it cleaning franchise, food chain franchise, cosmetics franchise, or any other work from home franchise. Choose wisely!