Being able to work for yourself and not someone else is a compelling idea for many people. You may just be starting your career and dreaming of building a business. Or, you may have had a long and successful corporate career and are longing for something more—additional money, greater flexibility or the chance to focus on something you love.
The first step in determining whether franchise ownership is right for you is to begin with a self-assessment of your strengths, weaknesses, interests, skills and work/life aspirations. Do you work well in a more structured environment? Are you risk-adverse and like having a support system? Do you like working closely with others or do you prefer to work alone?
Franchise ownership poses its own challenges and benefits. Evaluating these pros and cons can help you get closer to realizing what the right venture is for you.
Building a Brand
Building a brand is no small feat and can be quite expensive and time-consuming. When you sign on with a popular franchise, the work has been done for you. We all know Subway, ACE Hardware and Pizza Hut, and we’ve become accustomed to a certain set of standards from these businesses. Customers will seek out these establishments for the familiarity received over years of visiting them.
Additionally, if you are part of a nationally recognized brand, you automatically have the power of that franchise’s marketing and advertising dollars to support you. This will inevitably result in a faster time to market and quicker ROI.
However, brand awareness comes with a price tag. Buying into one of these better proven franchises can be expensive and require more startup costs than building your own business.
Choosing a Location
Site selection is critical for many businesses and most franchisors pre-approve sites for outlets. This may increase the likelihood that your location will attract customers. The franchisor, however, may not approve the site you want. If there’s a locality you want your business to be in, and it doesn’t match the franchise opportunities in that area, then buying a franchise may not be right for you.
In addition, franchisors may impose design or appearance standards to ensure customers receive the same experience in each outlet. If you are passionate about creating a look and feel for your business, you may have a hard time following the guidelines set forth by the franchisor.
Receiving Training and Support
Perhaps one of the biggest advantages to buying a franchise is the training and ongoing support you receive from a franchisor. They can help with managing the day-to-day business, from hiring and training employees to keeping the finances. Franchisors can help you learn to run a business rather than doing it on your own, which can lead to mistakes that affect your business’s bottom line—whether through the cost of time, money or both.
Understanding Costs and Fees
Depending on the system, startup costs for a franchise can be steep. Many franchise owners find it necessary to secure financing to purchase their business.
In addition, most franchisors require franchisees to pay ongoing royalty and/or advertising fees. Though you benefit from the training, support and marketing efforts this affords, you will always owe a percentage of your profits to the franchisor.
Finally, when you buy a franchise you sign an agreement which locks you in for a specified amount of time, anywhere from five to 20 years. Breaking a franchise agreement can be difficult and costly.
Starting your own business can cost significantly less than owning a franchise and many startup owners have gone on to run successful businesses with less upfront capital. When trying to secure financing, some investment groups may favor those partnering with a well-known franchise over an independent new business owner.
Buying into a franchise system requires you to run your business as dictated by the franchisor with little leeway for business decisions including look and feel, purchasing equipment and overall operating procedures. You may control your franchise unit’s culture and who you hire and fire but you still must follow a prescribed set of guidelines.
To maintain uniformity and ensure future success within a franchise system, franchisors can be very diligent about enforcing policies and procedures. The franchise system they created is their most valuable asset. If following and adhering to a prescribed set of operating instructions to run your business is not something you are envisioning, then franchising may not be the path for you.
Having a brand name backing you allows you to benefit from the collective buying power of the franchise when it comes to purchasing equipment and supplies. This can be critical for finding the right supplier and negotiating deals. Franchisors can also help you with determining what equipment you need, the right size and the amount of supplies you’ll need.
At the same time, franchisors’ requirement for you to purchase equipment and inventory only from approved suppliers will limit what you can purchase and limit your ability to purchase something at a discounted price from another dealer.
Establishing Values and Relationships
As a franchisee, you will be signing a long-term contract with your franchisor and creating a relationship through which you will need each other to succeed. It’s critical you do your research and ensure your core values and goals align with those of the franchisor.
If you choose to build your own business, then you won’t be as constrained by the franchisor/franchisee relationship, but you also will not receive the support you may need down the road.
So, is a franchise right for you? As you can tell the decision is very dependent on the professional and personal experience you want to gain through this next venture. There are merits and perils with each, but at the end of the day, only you can make the right choice for yourself.