Advantages and Disadvantages of Franchising for Goal-Oriented Entrepreneurs

What are your goals as an entrepreneur? Could the advantages and disadvantages of franchising help you achieve them?

Maximizing Your Entrepreneurial Acumen

What are your goals as an entrepreneur? Could the advantages and disadvantages of franchising help you achieve them?

Advantages of franchising for the entrepreneur

As an entrepreneur, you’ll be focused on building a business that helps you achieve your goals. Buying a franchise instead of creating a business from scratch is a solution that many entrepreneurs take. 

In fact, franchise ownership is big business in the United States. By the end of 2019, there were 773,603 franchise establishments in the country, with a combined economic output of almost $800 billion and employing almost 8.5 million people. All those entrepreneurial franchisees with all their unique business goals cannot be wrong. So, what is it about franchise ownership that is so appealing?

When you buy a franchise, you are buying into a proven business model and a brand that customers recognize and respect. This should give you a jumpstart compared to building a business from scratch. Your prospective customers are familiar with the brand, and that could save you a small fortune on strategic expenses related to marketing, sales, and brand building.

You’ll also benefit from support and training from the franchisor. You may be provided with equipment and tooling for your business, an oven-ready marketing plan, and training that has been developed from years or even decades of experience. You’ll be able to access a pool of experience and knowledge that helps you develop your business faster and with more assuredness.

Another advantage that you are likely to receive as a franchisee is the benefit of buying power. As a solo business, you have much less opportunity to negotiate great prices for supplies to make your products. As a franchisee in a much larger business, you may receive very sizeable discounts from suppliers because of the size of the parent company.

Lower costs and higher customer visibility translate into higher profit potential, and faster than new, unrecognized brands. One word of warning here, though – more expensive franchises may not be worth it.

Disadvantages of franchising for the entrepreneur

Every coin has a flipside, and buying a franchise is no different. Of course, there are disadvantages that must be considered when buying a franchise business.

Perhaps the most pertinent of these is that, while you will be your own boss, your ability to do as you please is restricted. The franchisor will expect you to follow their business model and processes. How you are expected to behave will be detailed in the franchise agreement, and there will be sanctions laid out if you don’t stick to the ‘rules’. 

Then, of course, there is the initial cost. You’ll probably need to pay all the costs of setting up a business independently and an initial upfront fee to the franchisor. However, this fee should be seen as a cost of opening your business – a cost of doing business under the franchisor’s tradename.

There will be ongoing costs that must be paid from your revenues. These include commissions and royalties that are due to the franchisor, and other costs such as marketing and advertising and charges for ongoing training as set out in the franchise agreement.

The franchisor is likely to oversee your business (again, if stipulated in the franchise agreement). This means your finances are open to scrutiny by the franchisor. This is a close business relationship that could cause conflict if you don’t have the personality to accept guidance and advice from what is, in many ways, a senior partner in your business.

Mitigate the disadvantages to maximize the advantages

As with any business, if you can reduce the potential disadvantages, they cease to be barriers to achieving your goals. You can still be your own boss, but with the advantage of a franchisor’s support. 

The many advantages of buying a franchise should crush the risk of starting a business. You’re benefitting from a recognized brand and successful business model.

How do you benefit from the advantages of franchising and mitigate the disadvantages? 

Buy the right franchise. Match it to your personality and strengths, and invest in the right business sector. You can then take advantage of the competitive dominance of brand name. To start your journey to life as a franchisee, book your free consultation with New Ground Consulting.

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