We get emails and calls from listeners on a regular basis asking whether or not they should buy into a Franchise as their small business. This is a tough question for me to answer as there are very strong pros and cons on both sides of that equation.
Pros of Buying A Franchise include:
- Turnkey System: A franchise system is a proven system.
- Franchise Support: Small business owners get a support network to run their small business.
- Brand Name: Having a brand name can be a very powerful tool for a small business owner.
- Lower Inventory Costs: Small business owners can save costs on goods, as they can be bought in groups.
- Easier Staff Recruiting: Recruiting can be easier for the small business owner if they have a easily recognizable brand name.
Cons of Buying A Franchise include:
- Less Control: Franchisee small business owners have to play by the franchisor’s playbook. Even if the franchisee has figured out a better way to do something, they could be in big trouble if they deviate from the established operation guidelines.
- Royalty Payments: Each franchisee has to pay royalties every year, regardless of revenues.
- High Startup Costs: Buying a brand name franchise is very expensive and involves jumping through many hoops.
- Broken Promises: Franchisers often do not live up to their end of the bargain. If that is case, there is little recourse.
Investing a franchise can be good for small business owners with little industry specific experience, but who who have more financial resources. Other startup small business owners, who want to be more independent entrepreneurs, should think about going it on their own.