– Like Anything In Life, There Are Pros And Cons
Franchise Advantages
Buying a franchise provides resources that can bridge the gap between learning a new business and industry by having a franchise system in place which ensures the likelihood of success through the initial transition years.
The largest benefit of buying a franchise is having that proven system and training for the new owner and their employees. As a franchisee, you don’t have to be the idea man; just follow the system that has the proven success record.
One of the other great advantages is customer exposure by the way of location. One of the resources of almost any franchise is site selection assistance with a professional real estate marketing partner. Having access to a tried and proven demographic model will greatly improve the probability of success.
Franchise Disadvantages
Other than the initial purchase period, and depending on the particular franchise, the franchisor may not provide much assistance or value for the franchisee. The monthly franchise fee, which is between 3-7 percent of gross sales, is mostly allocated to the approved advertising budget. This usually focuses on a national audience and can sometimes be ineffective for the franchisees business and/or area if it doesn’t take into account for current local market trends.
Another disadvantage is the restrictive nature of expanding the business. As the franchisee develops their business, the franchise opportunity often begins to feel confining to an entrepreneurial spirit. Traditionally, it is not possible to implement unique branding or issue process changes into the franchise system.
It is important to ask questions up-front of other owners, vendors, or see an existing franchise location to help answer any of the questions associated with what the owner is willing to accept when moving forward with a franchise purchase.
Exit Strategies Available
Many franchisors have buyout options for franchisees that have outgrown the program. The guidelines of a franchise, the Uniform Franchise Offering Circular (UFOC), will have the procedures for buying out or selling the franchise.
Some franchise programs will even have a transition team that helps sell the franchise, which is often the best opportunity to obtain the highest price when selling the business.
To learn more about franchise business pros and cons get “ENTRANCE“– A Business Owner’s Guide To Buying a Business”, by Alex Vantarakis,