There are many factors to consider when asking whether investing in a franchise is a smart move or not. It depends on who you are, your background, and even your personality. Instead of giving you a clear cut answer, here are the pros and cons of investing in a franchise to help you decide:
An established brand name attracts more customers
This one’s self-explanatory. While you’ll still do some marketing, it won’t be much of an uphill battle as it is for entrepreneurs who are trying to make it out on their own. The name is already familiar, so you won’t have much trouble trying to coax some costumes. This, of course, means savings in customer acquisition, giving more time to focus on running the business.
Recruiting staff is easier
This is another positive effect of having an established name. People are more wont to find employment in established companies as they promise more benefits and stability.
You will receive a formal training program
Since you carry the brand name, the franchisor (if they’re good) will provide formal training for you and your colleagues to maintain the franchise’s reputation. This is a benefit for you too, of course, because it will help you with some of the heavy liftings of maintaining quality. Training is usually provided at the franchise’s corporate headquarters or at your (the franchise’s) location.
You gain access to lower prices for inventory
Franchisors buy inventory in bulk because they’re also buying for all their franchisees. This makes it easier for them to get discounts. That’s something an independent entrepreneur can’t do, given their considerably smaller need for supplies.
The start-up costs can be high
Becoming a franchisee isn’t cheap. If you’re not financially capable, perhaps an independent business would be more suitable.
You have less freedom
As a franchisee, you will have to share financial information and follow uniform operating procedures. Also, you will have to mirror every move your franchisor makes. After all, as a franchisee, you are only a small part of a bigger whole.
Their reputation is your reputation too
Speaking of being a small part of a bigger whole: if one of your fellow franchisees or your franchisor does something to tarnish the company’s name, you’ll suffer too. It doesn’t matter if they’re from half way around the world. It’s the brand name that counts. That’s what people will remember.
Royalty Payments is something you have to pay your franchisor regularly in return for the support they give in operations and advertising.
Now that we’ve laid out the pros and cons, what do you think? Is investing in a franchise a smart idea?