The Pros and Cons of Owning a Franchise 

The Pros and Cons of Owning a Franchise 

A key aspect of “the American Dream” is to own a successful business. A major avenue for that pursuit is found in franchising, where a business owner signs a contract to use a franchisor’s brand name, business model, and operating system. Today, there are over 3,000 franchised brands with more than 780,000 franchises, according to FRANdata. Owning a Franchise comes with both pros and cons.

Pros of Owning a Franchise

There are many pros to owning a franchise. First, a franchisor has done the “groundwork” to establish a business. That includes having identified a brand’s products and services, developed an operating process, created a brand name, and devised marketing methods. Unlike a start-up, a franchisee thus doesn’t need to “start from scratch.” With an established franchise, there is some existing brand name recognition. There is a training program established that can be replicated location by location, along with some ongoing training support and operating guidance. There is guidance and assistance available for marketing and advertising methods. Often there is some shared marketing and advertising activity. There is access to the combined purchasing power of the franchise. And there can be access to financing assistance.

The Cons of Owning a Franchise

The cons of owning a franchise start with not being entirely independent. A potential franchisee must understand that a franchisee, by contract, must abide by the franchisor’s rules and procedures. Those rules apply to most aspects of the franchise including operating practices, training, marketing, signage, uniforms, packaging, and more. The costs of buying a franchise can be high because there is a franchise (licensing) fee to begin with. Additionally, a franchisee must pay ongoing royalties to the franchisor. Lastly, a franchisee is linked to the franchisor, so if the franchisor has reputation problems or other problems, those can ripple down to each owner.

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