The Pros and Cons of Franchising

Anyone who wants to enter into business should consider franchising as an option. There are numerous benefits to using someone else’s business model to run a successful business. Franchising will not work for everyone and it takes a great deal of research to find the right franchise for your knowledge and expertise. Below is information that can help you decide if franchising will be of interest to you. We have come up with a list of pros and cons to help.

Pros of Franchising:

A good rule when deciding if franchising is right for you is to see how many of the pros actually fit.

  1. A franchise offers an established business model.

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  2. You have a trade name that consumers and potential consumers can recognise.

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  3. The franchisor will provide you training and support to help you run a successful business.

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  4. Financing is easier to obtain from banks due to the proven business model.

Now that you know the four pros consider each one of them. In your research of the franchise you are interested in, did the business model have supporting evidence? Some franchises may look great on paper, but reality does not support it. The trade name may be known to consumers, but do those consumers actually use the business? Brand recognition can also mean negative reactions. You have to gauge the area you wish to open the business in. Training and support should be part of the investment, but how long is the owner willing to work with you? Some franchises offer three months while others provide a year of support. Lastly, you still have to prove to the bank that the business model can be successful in your area. If you cannot prove this to the bank they will not loan you the money even on a franchise.

Thus you need to know if all four advantages are actually part of the franchise you are researching.

Cons of Franchises:

  1. Lack of independence

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  2. Business activity restrictions

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  3. Sale restrictions

A proportion of the franchise will be limited to the business model and owner preferences. This means you may not be able to change certain things in the franchise even if they are not working for you and your particular area. These limitations can quickly turn a great franchise into an unsuccessful business.

At any time you may wish to sell the franchise you may not be able to. The contract usually states the restrictions you are held to. It can also mean that in an emergency situation if you have to sell the business you might not be able to.

Lastly, you might wish to conduct certain business activities, which are outside the agreement. A good example is holding a sale or promotion to bring in consumers. The franchisor may not allow this on the grounds that it is not part of the business model. If these disadvantages are something you can work with then continue pursuing a franchise opportunity and get your business started.