Owning a Franchise
Owning a successful franchise can be very rewarding. It’s like starting your own business from scratch, except you have a huge advantage. After all, your success rate is drastically increased because you’re working with a proven business model.
Everything is figured out for you. You don’t have to worry about what products and services to offer. The design of your franchise is worked out for you. You have proof because it’s working in other locations.
You don’t have the creativity or freedom that you would if you started your own business, but you do have a business model that works. There is a lot to know about starting a franchise.
This post contains many resources from many people that specialize in owning, operating, and setting up a franchise. In the resource section, you’ll come across a unique collection of articles that I have put together, offering you an overall perspective of what you can expect from owning a franchise, but first, let’s go over a few key issues to keep in mind.
Is It Better To Start a Business or Buy a Franchise?
When starting a new business, it takes time to get customers through the door and build a reputation. When starting a new business, it usually takes time for revenue to start flowing at a steady rate.
A franchise is a great way to get started in business because it has a proven model that’s already profitable. Unlike starting a business from scratch, when you’re open for business, you start to bring in revenue a lot quicker because of the franchise’s reputation. Customers aren’t hesitant to come in and spend money because they already know what to expect.
Pros and Cons
Naturally, there are pros and cons to owning a franchise. Let’s go over a few of them:
The Pros of Owning a Franchise
- Recognition is one of the key benefits of owning a franchise. Building your brand as a new startup can take years. Compared to a franchise that comes with immediate recognition.
- A successful franchise is already known, and when you open your doors, you’re ready to generate revenue.
- As a franchise owner, you benefit from corporate advertising and marketing campaigns.
- A successful franchise has a proven business model that works and is already profitable.
Cons of Owning a Franchise
- For Most Franchises, there is a franchising fee that you pay as long as you own it.
- You’re restricted by how you operate your franchise.
- There are strict rules and regulations you have to follow. Violations can result in the loss of your franchise.
- It takes a significant investment, especially for a high-end franchise.
- You can’t have sales or promotions unless approved by the head office.
- You can’t add or eliminate any products and services unless approved by the head office.
- The look and feel must be standard to match other franchises; you can’t be creative.
For more on the pros and cons of opening a franchise, see the following:
Accoding to franchising.com, the cost of a franchise varies from $10,000 to Five million. The majority run between $50,000 to around $200,000 to get started.
To figure out the cost of your franchise, you need to identify the franchise you’re considering. No average figures will be accurate enough for you.
The numbers mentioned above can mislead you. Suppose you’re considering getting into a McDonald’s franchise. It may require two million dollars, where a subway franchise may cost under $150,000. The cost varies, and unless you determine the franchise your considering, you won’t be able to get a ballpark figure. Once you know, it’s easy to find the startup costs.
For more on The Cost of Owning a Franchise see the following:
To find out how much a Franchise owner makes, you first have to define which franchise you plan to operate. Each one is different, and each franchise performs differently. For example, A well-known global franchise will allow the owner to make a healthy profit compared to an unknown local one. Therefore to get an accurate idea, you’ll have to dig a little bit deeper.
Figure out what franchise you want to start, and from there, you’ll be able to do a little research and find out the average earning potential of a franchise owner.
For more, see:
The Success Rate of a Franchise
A well-known and tested franchise has a better chance to succeed compared to starting your own business. A franchise has a proven business model. All the startup work is already complete, including; product and marketing research. The setup of your business is already laid out. The company will also determine if the franchise is fit for the area you’re planning to operate.
Are all franchises successful? Absolutely not, many fail, and you don’t want to get into an opportunity just because you can afford the startup cost or because there is an open slot. You want to get into a franchise with a proven track record and have the numbers and reputation to back up their claims.
The Process of Owning a Franchise
Every franchise has its regulations and requirements to get
accepted as a franchisee. Some of the requirements and qualifications for many franchises include the following:
You will probably have an interview to determine if you are the right fit.
You must meet the financial requirements, and this could include a credit check to determine how you handle your finances.
The location you’re planning to start your operation must be approved. Many franchises won’t allow you to open in an area close to another franchise owner from the same company.
The franchises know the numbers and conduct research. If a small town’s population does not support the franchise’s success, your application will be denied. And that’s a good thing because that protects you from investing in something that obviously won’t succeed.
Red Flags When Considering A Franchise
If a franchise allows anyone to get accepted, that would tell me all they care about is selling their opportunity. Not everyone is a good match to run a franchise.
No Location Restrictions:
If a franchise doesn’t have a strict policy about the location, that would indicate they haven’t done their research. Allowing multiple locations with no restrictions translates to franchise owners competing against each other. The company’s main concern is selling its franchise rather than control and quality.
No or Little Product Restrictions:
No restrictions on the products and services your selling:
Suppose a franchise allows you to modify the business model. In that case, it’s not a true franchise because anyone could do their own thing, and you’re using their name, paying fees, and not a proven business model.
A franchise opportunity that offers little or no training is a red flag. Other franchisees are doing their own thing, and each one is different; therefore, this isn’t a true franchise, and you’re not using the proven business model.
I was looking into a computer repair franchise. When I asked about the training and procedures for repair, they said everyone has their way of repairing computers. I asked what they provide, and it was using their plan and marketing strategies. Hmm, not much of a franchise.
Avoiding Direct Questions:
If you have legitimate questions regarding results and the representative from the franchise bypasses your questions, then that’s a red flag. It would be best if you had your questions answered with proof. If you’re not satisfied with the answers now, you won’t be satisfied with the results later.
As mentioned earlier, below, you’ll find a unique collection of resources I have put together to give you inside information and other people’s insights related to buying a franchise. You can return to this post any time you need more information because it’s a lot to go through in one visit.