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Is Buying a Franchised Business Right for You

A franchise can even be a way of ‘buying a job’ for those with retirement savings or redundancy payouts. But is it right for you? Here are some of the pros and cons that you need to consider.

Five big positives

  • You are your own boss and you own your own business.
  • You lower the risk of failure by starting in a business that’s already been proven elsewhere.
  • The business comes to you as a package. Usually everything from the products to the look of the business and the operating system is included in the franchise.
  • The franchise has a name people already know. You don’t have to build up recognition from a zero base.
  • You have the assistance of the franchiser in sourcing products, in providing training and in your marketing.

Five big negatives

  • You have to follow the directions of the franchiser in just about every aspect of the business so you’re not really independent.
  • A percentage of everything you sell usually goes to the franchiser on top of franchise fees and a contribution to shared promotional costs.
  • Your sources of supply are limited to those stipulated by the franchiser.
  • If the franchiser has financial problems it can impact on your business as well.
  • If there’s a disagreement between the franchiser and yourself it’s possible for your franchise agreement to be terminated (or not renewed) and put you out of business.

So what’s the answer?

There are these and many other reasons both for and against buying a franchise but generally a franchise offers a range of advantages over starting your own business from scratch. Whether it’s really for you depends largely upon the type of person you are.

Understand that no franchise comes with a guarantee of profits. Every business is an independent operating entity that will largely succeed or fail on its own merits. Although the franchiser dictates the terms on which you trade, your own input into the business will have an influence on the bottom line.

You have to follow someone else’s way of doing business. If you can’t see yourself doing that (and many very good managers are simply too independent to accept this) then a franchise isn’t for you.

The franchise you buy should be in an area you can both relate to and enjoy. Even if the business makes money, experience shows that a franchisee needs to enjoy it to really stay with it and realize its potential.

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Business Roadmap provides practical business advice for small to medium sized businesses that are trying to overcome problems, or are trying to achieve their vision and full potential. Visit the Business Roadmap website for further information.

Disclaimer: While every effort has been made to provide valuable, useful information, Blue Mountains Web Pty Ltd. (trading as Stralia Web), Business Roadmap Pty Ltd. and any related suppliers or associated companies accept no responsibility or any form of liability from reliance upon or use of its contents. Any suggestions should be considered carefully within your own particular circumstances, as they are intended as general information only.

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