Are Franchises A Good Idea? Find Out The Pros And Cons Here

Posted on Jan 19 2015 - 8:32pm by Editorial Staff

Subway

The idea of franchises gets sold to people as ways of starting new businesses without starting from scratch. You have an existing brand, products and services that you sell to consumers. All you do is follow the rules of your franchise license, and you’re on your way to business success. Or so you might think!

I’ll be honest with you here. Franchises aren’t for everyone. Some folks just aren’t cut out to run a franchise. And some franchise license agreements range from ridiculous to downright outrageous!

Of course, it’s not all bad news! If you’re matched up with a good fit, a franchise startup business could be the best business decision you ever made. In today’s featured post, I will share with you the pros and cons of setting up a franchise business.

Pro: you don’t have to establish a new brand

The major bugbear for most new startups is having to establish their identity in the marketplace. No-one knows who they are. If they don’t tell people who they are and what they do, they won’t survive for long.

Franchises get around this obstacle because they are already established. Some of the most well-known franchises include McDonalds and Subway.

Con: you have to pay licensing fees

Part of the deal with most franchises is that you have to pay brand fees to the companies you license your franchise from. Brand names and logos are just some of the assets companies can license out to third parties.

One sticking point of franchise operations is you have to pay these fees regardless of whether you’ve made any money or not!

Pro: franchises can offer excellent industry opportunities

As a franchisee, you stand to benefit from industry exposure through an established firm. You will usually receive comprehensive training on the items you see and your likely customers. And you can find out just how important your industry is.

For example, let’s say you are setting up a kosher food franchise. You can learn more about kosher certification and its importance in your market. The knowledge you gain might not have been so accessible if you set up the business on your own.

Con: brand reputation can become a double-edged sword

Most people will do some prior research into a brand before they enquire about franchise opportunities in it. Sometimes people don’t do enough research and can end up setting up a business marred by controversy.

The last thing you want to do is invest lots of cash in a failing brand. Not only is it a waste of time but you are seldom likely to see your money back if things go wrong!

Pro: you get lots of support

Good franchisors will offer a wealth of knowledge and general support to new franchisees. During those early stages, it’s crucial franchisees get things right from the outset.

If there are any questions, they can rest easy knowing they’ll get the answers to them from their support network.

Con: franchises can be a legal minefield

Anyone that runs a business will tell you that paperwork and contracts are part of any successful enterprise. With franchises, this legal red tape can often get complex! You’ll usually have to hire a lawyer to read through everything with a fine toothcomb.

And you know that that means: expensive lawyer fees to pay!

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Editorial Staff

Editorial Staff at I2Mag is a team of subject experts led by Karan Chopra.