Having a midlife crisis is sort of like reaching the point in our entrepreneurial career when we are looking for something new. No, not being mutton dressed as lamb, nor driving around in small sporty looking cars. Instead we are looking for new entrepreneurial opportunities, such as buying a franchise business.
However starting any business from scratch requires a huge effort, one which we are not all cut out for. This is where buying a franchise is an opportunity that can deliver huge benefits.
But with benefits, there are also possible negatives to becoming a franchisee.
Let’s investigate further and see the pros and cons of buying a franchise.
Pros of Buying A Franchise
You’re in business for yourself, but not by yourself.
Yes, you own the license to operate your own franchise business unit. Yes, you run the day to day management yourself. Yes, you get to keep most of the profits. But no, you do not have to do everything by yourself.
A franchisor will provide a support network of other franchisees that, just like you, also run their own business. The opportunity to discuss common issues and ideas within the support group is a huge plus.
Most likely any problems that crop up, others have gone through and can provide some assistance with.
Brand awareness already exists.
Why reinvent the wheel when we can buy one that already works? A franchise has already had the research, product development and marketing done for us.
This is great, especially if sales and marketing is not your strong point.
Customers already know about the brand and have certain expectations about the product or service it delivers.
When hiring employees, we are more likely to attract high quality people, drawn by a known franchise name.
Financing – easy to get, save and earn money.
A huge plus is that a franchisor is most likely to have good relations with a bank. They can “introduce” us to that bank, which is more likely to lend us money for setting up our franchise because they already know the ins and outs of it.
We can save money because we don’t need to test or research the market and as part of a franchise, and we have bigger buying power which lets us buy the things we need at a cheaper price.
Our ROI or return on investment is also quicker. Customers already know about the franchise name and have already been exposed to marketing regarding our products or services. They are ready made customers just waiting to come in our doors!
Cons of Buying A Franchise
Branding and procedure is tightly controlled.
If creativity and the need to do it your own way are high on your list of priorities, then owning a franchise may not be for you.
When purchasing the license to operate a franchise you are required to sign an agreement which basically says you will play by their rules. If you are not happy to do this, then the road to take is probably starting up your own business.
Open your wallet.
Initial and on-going fees are part of operating within a franchise. Upon purchasing the license, you are required to pay a lump sum to start using the franchise name. You also may need to foot the bill on the cost of purchasing the equipment to run the franchise.
You can forget any ideas you might have about buying stuff that you like more or works out cheaper, because you need to specifically buy the set items on the franchisors list. Then once it is up and running, open your wallet again. It’s time to pay royalty fees and a slice of your turnover to the franchisor.
Bad press spreads.
As a franchisee, you share the brand name with many other operators. This is usually great, but can turn bad very quickly if another operator gets some bad press.
You will instantly be seen as part of the problem and be linked negatively, even though it is only by name.
It would be hard to distance yourself from what happened as the general public will only see the name and not the individual franchisee as being in the wrong.
Investing in a franchise license may just be up your alley, but maybe the idea should just be flushed down the toilet. It depends on the sort of entrepreneur you are as well as the sort of risks you are willing to take.
If you are more of an easy going team player, then check out one of the many franchising options. If you are the type who believes rules are meant to be broken individual, try the path of establishing your own business.
But remember to use due diligence in regard to any decisions you make about franchising.
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