Pros And Cons Of Buying A Franchise
Years ago, I purchased a well-known janitorial franchise. My dad attempted to talk me out of it, but I did it anyway. In hindsight, a thorough review of the pros and cons of buying a franchise were significant.
After passing my hat around to family and friends, I had the cash needed. Promptly prancing my way to their office to make things official. I was ready to become a millionaire.
Choosing a franchise path to riches can have awesome results. You may be able to secure other locations or territories. Multiplying your financial goals exponentially.
Do a poor vetting job, and you could lose a bucket of cash and time. So, let’s dive into the pros and cons now.
1. Get educated
You know what they sell. But what does the market think of it? And what are the long-term projections for sustained growth? A biz that’s hot this year, but lacks a scalable future, should be avoided.
Sure, it’s a great idea if you already have experience in the field. But that’s not mandatory for success. Is it an industry that you can quickly and thoroughly become an expert in?
Great biz concepts don’t happen by chance. Rather lots of sweat equity. Can your small business idea grow into something substantial? Does your service or product have room to grow and develop?
But these popular big box names have been vetted. They have teams of experts with deep subject knowledge. Why not tap that instead?
2. Show me the money
With the custodial operation that I mentioned above I had to purchase supplies, maintain insurance, and accounting through the corporation. Not to mention the never-ending royalty fee that had to be paid.
Yes, I had immediate name recognition when I knocked on doors. But as my dad would say, “You’ve still got to knock.” His point, the advantage between an independent janitorial company and a franchise may be small in certain situations.
Well, I made zero profit in two years and had to sale my ownership rights. I started a cleaning business on my own and found myself with tens of thousands in my checking account within months.
“I feed truck drivers, millionaires all at the same table. Colonel Sanders
3. Proven system
Groups like Steak ‘n Shake and Chick-fil-A are famously known for being relatively cheap. This is a good thing. And at nearly $300 billion dollars in revenue, they’re doing something right.
Any startup has risk. And to help prevent failure many entrepreneurs turn to this system of licensing. It’s tried, tested, and can be duplicated.
Yes, you may have to follow certain guidelines and maintain a strict corporate posture. But you have the support of many.
Jumping out on your own can be exciting and profitable. But the learning curve can be step and unforgiving. Those that want to take a risk, albeit a calculated one, might do better with a partner. But if you like to do your own thing this may be a deal breaker.
4. Choose passion or profits
There will be many long days and nights with your new food empire. And a good cushion to handle the stress is a deep-seeded passion for what you’re doing.
Yes, you must earn a profit. But making this a lower priority will make all your other efforts that much easier to achieve.
Tackling daily responsibilities as mundane as bad reviews are more tolerable with an authentic passion for what you are doing. Are you only looking at cost and potential profits, or do you really want to be a part of the team? Being honest with yourself will prevent headaches down the road.
5. Do your homework
Of course, you will research the franchise. You’ll read reviews and check their website completely. You may already use their product or service. But what else should you do?
Have a sit down with a current licensee and discuss the opportunities. What are the pros and cons of working with these guys? What is management support like? When will you be profitable? What’s the marketing spend like? Best source for good employees?
A visit to their corporate office is another key in your research. What vibe do you get? Does their branded persona match what you see in real time?
In the end, choosing this partnership or not depends on what goals you have for yourself, honesty, and meticulous analysis.