Should I Buy A Franchise?

In Buying A Business by sgoodman1989Leave a Comment

When new entrepreneurs to be start looking for a business to buy, it is very common to see them start leaning towards a franchise. For some people, franchises are the perfect solution, and they do very well utilizing the franchise model. However, we see people all the time who are kicking themselves for getting involved with a franchise in the first place. Here are a few things you should consider before deciding if buying a franchise is the best route for you.

You are buying a ‘business in a box’ 

When you buy a franchise, most of the prep work has been done for you. You don’t have to worry about picking a name, designing logos, creating menus, optimizing processes, or any of the other things that can be very time consuming. For many people, this is a huge benefit. They don’t want to deal with all of the details, they just want a business where they can go manage the day to day operations, and make a good living. Sometimes, the cost is an important factor. It can get expensive developing the framework for a business, and unless you are capable of doing a lot of market research, you don’t know if people will even use your product or service. In some cases it makes more sense just to buy the package.

No time spent on advertising or branding

In most instances, the franchisor is going to advertise the brand. They handle redesigning logos, updating menus, marketing new products, and much much more. They don’t usually do this for free, but it takes a lot off of your plate as a business owner to be able to pass those responsibilities along. Since the group managing the marketing is invested in the success of your particular business, so they are usually motivated to do a good job.

Training

Training is one of the most enticing aspects to a lot of future business owners. If you don’t have specific experience in the business that you are considering purchasing, it isn’t a deal killer. Most franchisors require training and testing in order to open one of their stores, so you have the opportunity to learn best practices, and a group that will likely help you along the way.

Strict Rules

If you want a business where you can dictate the hours, develop new products, and generally customize it to your liking, don’t buy a franchise. The whole franchise model is based on consistency between locations, which means you have to operate like every other store, whether you like it or not. That will mean structured hours, specific product offerings, set pricing, a uniform interior and exterior design, and probably a lot more. You have to be willing to let the franchisor dictate the way the business operates, and trust that each change they make is meant to keep the business and brand successful. This model works when you have a franchisor who is successful and cares about optimizing each of their locations, but if you purchase a poorly run franchise, you could end up locked into a contract that is going to do you more harm than good.

It Can Be Expensive

To open a franchise, their is usually an up front franchise fee, plus training fees, build out fees, and anything else that the specific brand requires. On top of that, you will pay a percentage of your sales each month, as well as advertising fees, and usually you are required to buy their products which are often more expensive than non-branded items. While a great franchise in a good location is well worth the money, that isn’t always the case. If you aren’t doing a very large volume, the franchisor could end up sucking up all of your profits and not providing a lot of benefit. Additionally, a lot of franchisors will charge you a fee when you try to sell the business as well, so don’t expect that to be your escape plan if things don’t work out.

There can be a lot of merit in buying a franchise instead of starting your own business, and for a lot of people this is a lot better strategy. Just make sure that you do your research on the company before you purchase a franchise, and if possible meet with some other owners of the same brand. This can help you to get an idea if that company is the best one for you, or if you should keep looking.

 

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