Franchise Ownership

Should I become a franchise owner?

Owning a franchise can be a great way to break into the world of entrepreneurship. In fact, many of our small business tax, accounting, payroll and insurance clients own a franchised business.  However, franchising isn’t for everyone. It’s best to review the possible pros and cons of franchising before making any commitments.

Potential Advantages

  • Mentorship: Most franchisors offer some managerial coaching to new franchisees.
  • Trusted brand and/or product or service: Many franchises offer a brand and/or product or service that is typically recognized by your target market.
  • Time-tested operating system: With the purchase of a franchise comes an operating system that ideally has been tried and proven through the years.
  • Group purchasing power: Most franchisors have contracts with suppliers, providing the cost benefits of buying in bulk.
  • Advertising and marketing: After paying a small percentage of gross profits to the franchisor, franchisees can usually take advantage of professionally created campaigns launched by the franchisor.
  • Financial help: Some franchisors will provide assistance to new franchisees in securing financing.

Potential Disadvantages

  • Fees: In addition to the upfront franchise fee, there may be ongoing royalties and, as mentioned above, advertising fees, which are typically required even if you don’t like or want to utilize the campaigns.
  • Control: You will generally have to abide by the many restrictions set by the franchisor. These can affect operations, types of goods sold, vendor relationships, marketing strategies, geographic location, and even website content/presence, among other key management decisions.
  • Renewal policies: Franchises are generally governed under a contract with an end date, and franchisors may choose not to renew at the time of expiration or may decide to raise fees or impose new restrictions upon renewal.

Sources:  1. Bureau of Consumer Protection “Buying a Franchise: A Consumer Guide.”   2. Forefield Newsletter

Post a Comment