Pros of Buying into a Business Franchise

Written by Daniel Cargille Friday, 22 April 2011 13:42

According to the International Franchise Association, there are more than 7 million people employed within franchises around the world. Likewise, a new franchise opens up every 8 minutes in the United Stated. By those numbers and additional research, analysts have establishes that one in twelve businesses is an established franchise. This is due to a growing boom in entrepreneurship - mainly among those who are not satisfied in pursuing a degree that puts them to work directly under a supervisor. The boom in franchises is also expected to continue... but is owning a franchise the right choice for you?

According to the International Franchise Association, there are more than 7 million people employed within franchises around the world. Likewise, a new franchise opens up every 8 minutes in the United Stated. By those numbers and additional research, analysts have establishes that one in twelve businesses is an established franchise. This is due to a growing boom in entrepreneurship - mainly among those who are not satisfied in pursuing a degree that puts them to work directly under a supervisor. The boom in franchises is also expected to continue... but is owning a franchise the right choice for you?

The Pros of Buying a Business Franchise

A Franchise is Turnkey - It is common for a parent corporation to have a development and deployment plan in place for a franchise to ensure that it operates properly and makes a profit. While it is not effortless to get franchises off the ground, they basically come with a written plan for success.

Business Franchise Support - When starting up a small business on your own there is likely to be a learning curve. Mistakes are made and hopefully learned from. With a franchise the mistakes have already been corrected for the most part. You are in a network. You may be your own boss but you are not forced to stand completely on your own.

The Power of the Brand - When you open an location with an established brand at a well researched and appropriate location you can almost virtually guarantee success. It also means a fair reduction in the amount of money spent on marketing to achieve the same level of draw.

Lower Cost Inventory for Business Franchises - Large franchises as a rule have much greater buying power than a single small business. The reason is that they buy in large quantities and have the resources to negotiate effectively with their distributors. A smaller start up tends to have a much rougher time of it trying to get the best deals for inventory.

Cons of Buying a Business Franchise

Less Freedom - When you open a small business of your own, you get to decide how everything rolls along. The business is truly yours. When you buy a franchise, it's -mostly- yours. You have to report financial information and conform to the uniform corporate procedures and strategies though some give you leeway and creative freedom to a point.

Royalty Payments - Though you receive support, marketing and buying power among other things from the parent corporation, you have to give back. The business franchise has to pay royalties to support marketing and other activities the parent corporation engages in.

Higher Start-up Costs - In many cases it can be more expensive to purchase a business franchise because you need to go all in with your investment and corporations typically have a minimum amount of capital that you're expected to have on hand - not in assets - in order to get started. A new business owner starting from scratch however might be able to trudge along by their bootstraps as they grow their business.

Communication Problems - You may run into situations where communication becomes an issue while trying to deal with the parent corporation. Some franchisors may not be able to provide support or help to resolve these issues. When you are running your own business you don't have to deal with anyone but yourself.

Buying a business franchise works best for individuals who are able to lead but still function best as part of a team. Careful consideration should be given to buying a business franchise, including research into the potential companies and markets that hold your interest.