why buy a franchise

Top Reasons to Buy a Franchise

More items

Full Answer

Why you might consider buying a franchise?

Why Franchise?

• Lower Cost. Unlike employees, franchisees make an initial payment in return for becoming a part of your business and then they continue to pay you a percentage of their revenue, ...
• Simpler Management. ...
• Faster Expansion. ...
• Better Market Penetration. ...
• Greater Commitment. ...
• Less Recruitment. ...
• International Potential. ...

What to consider before buying a franchise?

What to Consider Before Buying a Franchise

• Make Sure Your Family is On Board. Owning a franchise—or a business of any kind—is truly a family affair. ...
• Count Your Cash. ...
• Reach Out to Other Franchisees. ...
• Do Some Soul Searching. ...
• Test the Product. ...
• Understand What You’re Getting Into. ...
• Talk to a Franchise Consultant. ...
• Come Up With an Exit Strategy. ...
• Consult With Franchise Experts. ...
• Do Your Due Diligence. ...

What does "buying a franchise" really mean?

What Does Buying A Brand As A Franchise Owner Really Mean? The value of a brand. Starting a business as a known franchise brand is like being the only person at a convention who's wearing a nametag. Strength in numbers. ... The importance of brand consistency. ... Step into business ownership with an established franchise brand. ...

What are the benefits of owning a franchise?

Perks of owning a franchise

1. Brand name. Franchises are popular in the United States because consumers come back to what they know and love. ...
2. Tried and true system. When you open a franchise, you know you’re benefiting from the business method that skyrocketed the company.
3. Low cost of goods. ...
4. Support team. ...
5. Financing. ...

What are 3 advantages of owning a franchise?

Advantages of buying a franchise You don't necessarily need business experience to run a franchise. Franchisors usually provide the training you need to operate their business model. Franchises have a higher rate of success than start-up businesses. You may find it easier to secure finance for a franchise.

Why should you buy into a franchise?

Buying a franchise lets you skip over some of the early phases of business development, like creating a business plan, branding, and conducting product research. Instead, you can start your business with a market-tested product that is already familiar to your consumers.

Why do people own a franchise?

Anne says, “Training, support and expertise are the main reasons people buy franchises. Many come to a particular franchise with no specific experience or knowledge of the general business.

What are the five advantages of a franchise?

Ten advantages of franchising The risk of business failure is reduced by franchising. Your business is based on a proven idea. You can check how successful other franchises are before committing yourself. Products and services will have already established a market share.

Can you get rich from owning a franchise?

The bottom line is that while a franchise can make you independently wealthy, it isn't a guarantee. Choosing the right business in the right industry, and going in with preexisting entrepreneurial experience and/or existing wealth can help, but your income-generating potential may still be somewhat limited.

Do franchise owners make money?

Franchise Business Review found that the average annual pre-tax income of franchise owners in America is $80,000. Only 7% of franchise owners make more than $250,000 annually, and 51% earn less than $50,000. Legally, franchisors cannot give income amounts or forecasts of future income.

What are the cons of owning a franchise?

Disadvantages of FranchisingLimited creative opportunities. ... Financial information is shared with the franchisor. ... Varied levels of support. ... Initial investments and start-up costs can be expensive. ... Contracts aren't permanent. ... You're your own boss, but you have less individual control.

What do you gain from a franchise?

There are several advantages of franchising for the franchisee, including:Business assistance. One of the benefits of franchising for the franchisee is the business assistance they receive from the franchisor. ... Brand recognition. ... Lower failure rate. ... Buying power. ... Profits. ... Lower risk. ... Built-in customer base. ... Be your own boss.

What is the failure rate for a franchise?

Pretty much every year the survey has been conducted has shown between 8-12% of franchise businesses left their franchise each year. This is for a variety of reasons, including retirement, selling, ill-health and financial failure.

Is it better to own or franchise?

Bottom line, franchises have a higher overall success rate than startups. Franchises operate under a predetermined business model that has already brought success while independent businesses make adjustments and decisions to their business model as they go.

Why do franchises fail?

Overseeing and managing a large franchise system requires a significant amount of liquid capital. If a franchisor does not have adequate reserves, or if a large number of franchisees are struggling to make their monthly royalty payments, then this could lead to systemic failure and widespread franchise closures.

What are the risks of franchising?

5 Risk Factors to Consider Before Buying a FranchiseFads. Successful and well-known franchisors have usually been in business for several years, but there are certainly some newer franchise brands that are doing very well. ... Regionality and Seasonality. ... Recession Resistance. ... Capital Risk. ... Government Regulations.

What are the pros and cons of owning a franchise?

Benefits and Cons of Franchising: A SummaryAdvantages of buying a franchiseDISADVANTAGES OF BUYING A FRANCHISEBrand awareness already exists for the business, making it easier to draw in an audience and generate profits.Initial investments can be high, and some companies require payment with non-borrowed money.5 more rows•Aug 30, 2021

What are the seven benefits of franchising?

7 Benefits of Franchising For BusinessesA Great Way Of Capital Acquisition. The lack of capital is the greatest expansion barrier faced by many modern small businesses. ... Committed Management Acquired. ... Rapid Growth. ... Increased Profitability. ... Increased Business Value. ... Penetration Of Other Markets. ... Low Risk.

Is franchise business A good Idea?

Risk – The biggest advantage of owning a franchise business is investing into a business which is already tested and proven. The probability of the risk regarding the profits and growth of the business is likely to be very low.

Is buying a franchise better than starting your own business?

Bottom line, franchises have a higher overall success rate than startups. Franchises operate under a predetermined business model that has already brought success while independent businesses make adjustments and decisions to their business model as they go.

Franchises Offer Brand Awareness

Nothing signifies a company’s reputation more than its brand. Brand recognition provides much needed comfort to consumers when purchasing products or services. This consumer confidence translates to a loyal customer base, who immediately know and trust the product or service being purchased.

Higher Likelihood of Success

With all the benefits that come along with a franchising opportunity, there is a higher chance of having a successful and profitable business. Following an established business framework prevents many of the pitfalls that can come about when attempting to start a business from scratch.

Easier To Obtain Financing

The expectations for any lender are limiting the chance of consumers defaulting on repayments and trusting their loans will be paid back on time. With its proven track record, obtaining a loan to purchase a franchise offers a much lower risk of defaulting on the loan than many other lending scenarios.

Training

Training is necessary in order to improve the chances of running a successful franchise. Franchisor’s are well aware of this important aspect of running a business and will offer an extensive training program to ensure the franchise runs efficiently and as error free as possible.

Marketing

Another important key in successfully running a franchise is marketing. A franchisor will provide an established marketing strategy, which can lead to attracting new customers, customer retention, and expanding the overall franchise customer network.

Franchise Versus Startup

Franchise owners benefit from being part of a larger, established business, which has already forged a path of brand awareness and a solid customer base.

Be Your Own Boss

Owing a franchise provides individuals the luxury of being their own boss. For those that despise micromanagement, challenging work schedules, and having no control in the decision making process, owning a franchise is your way out of this unappealing cycle.

You Have Huge Support Behind You

Running a business on your own can be tough. If there is a complicated legal or personnel problem that comes up, you have to find someone to hire or deal with it on your own. In extreme cases, problems such as these can bankrupt or ruin your business if you’re not careful.

All the Most Popular Brands are Franchises

When you think about franchises, what comes to mind? If your answer isn’t automatically “the biggest brands with huge sales,” then you’re missing some of the data.

You Can Focus on Business and What Works

When you buy a franchise, all guesswork is taken out of how you run your business or market it.

Start Working, Stop Guessing: Buy a Franchise

If you’ve always wanted to run your own business, but didn’t know whether you had the gusto and authority to do so, then perhaps you should buy a franchise. When you purchase a franchise from a larger corporation, you’ll automatically have access to the history and marketing of the major brands that people love and use already.

Why do people choose franchising?

The desire to control your own destiny, to build a business for yourself and a legacy for your children , has always been a powerful motivator in business and in life. If that's not enough on its own, further motivation is provided by the never-ending cutbacks in corporate life, not only in job security and benefits, but in pensions and health insurance for retirees. Franchise ownership combines a sense of independence (within limits) with a greater level of security.

Why is franchising important?

From new restaurants and retail stores to products and services that make life easier, innovation is a key ingredient in success (as is consistency). But, as noted above, new businesses are prone to failure, and most new ideas take time to catch on. Franchising allows entrepreneurs to plug into a proven, successful idea and operating system, and focus their efforts on running the business, rather than on adjusting it in midstream. The wheel's been invented, perfected, branded, and marketed. As a franchisee, it's time to roll.

What is the benefit of franchising?

Independent business owners can join local business associations or trade groups to network and discuss common problems--but who knows more about your business than someone who's also doing it? Peer support from fellow franchisees is an invaluable benefit of franchising. Since each franchisee has an exclusive territory, cooperation is not only possible, but is built into the franchising business model through annual conferences, regional meetings, intranet sites, and daily phone calls where franchisees can share tips, ask for help, and gain from the experience of older franchisees.

What does franchising provide after opening?

After opening, any franchisor worth its salt will provide not only ongoing technical training (new haircutting styles, new tax rules, new equipment, new technologies, etc.), but also mentoring and career growth opportunities for its franchisees. This can include resolving daily problems, marketing more effectively, and hiring, training, and retaining employees. Franchisees and their managers also benefit from business coaching and training--lifetime skills that are transferable to any other franchise or any other business.

What does franchise fee buy you?

Another thing your franchise fee buys you is the right to an exclusive territory, designed to provide a sufficient number of the right kind of customers for your investment to succeed. Franchisors generally are reluctant to award territories too large for a franchisee to serve adequately (and because they want to sell as many as they can, within reason), the smarter ones will err on the side of awarding territories that give their franchisees the best chance of success.

What is franchising for yourself?

As the truism says, franchising is about being in business "for yourself, not by yourself.". For those new to the franchise business model, the notion of writing a large check at the outset (the franchise fee) and another every week or month (the royalty) may seem strange, objectionable, or even a deal-breaker.

How long does it take to become a franchisee?

In fact, they need franchisees to succeed. That's why intensive training is included in the franchise fee. It can take days or weeks, depending on the brand. Prior to opening for business, franchisees are trained in all the brand's specifics, from cash registers and point-of-sale systems to brand identity and culture, sales and marketing, and everything and anything that makes that brand unique. They also benefit from instruction in business, technical, financial, and management skills.

Why do people become franchisees?

While the reasons people choose to become franchisees are varied, the idea of going into business for themselves and ultimately getting the opportunity to improve the quality of their lives is shared and truly valued.

Why is franchise ownership important?

For a great number of aspiring entrepreneurs and business owners, franchise ownership has proven to be the right tool for them to realize their dream of being their own boss while having the backing and support of proven system.

Why is mass purchasing power important?

When a franchisor is a large, well-respected industry leader, they are able to provide ongoing research and development of new products and services and also negotiate special discounts and deals that franchisees should take full advantage of. This saves you time and money because the franchisor is utilizing its resources to benefit individual franchisees. There is strength in numbers, and the best franchises know how to maximize that mass purchasing power.

What to ask when researching franchises?

When researching franchises, you should ask about the company training and support systems and make sure ongoing local support is provided. Not all franchise business models and training programs are created equal, and you should make sure you are supported every step of the way.

Do you need to reinvent the wheel to become a franchise?

When you enter into franchising, you are buying into a system that has been proven and refined. There is no need to reinvent the wheel when you join a respected franchise family , and in fact you do not need any industry experience when you have a franchisor that offers comprehensive training and multiple layers of corporate and local support.

Is location finding part of franchise investment?

Is location-finding part of your franchise investment? The franchisor worthy of your investment will assist you to secure your franchise location and also have financing options available to you as a qualified buyer. In addition to assisting you with location-finding, the best franchises offer on-site setup of your business with local field support teams, which will help reinforce your training and help you get started. Even after the training and initial setup is complete, the franchisor should always be there to support you both on the corporate and local levels.

What happens when you buy a franchise?

When you agree to buy a franchise, you’ll no doubt sign a contract such as a Franchise Disclosure Agreement, which lists all the things you can and cannot do as a franchisee. Break one of those many requirements and you could lose your business altogether.

How do franchises promote their business?

Although you as a franchisee may be required to invest a certain amount of time and resources in marketing and advertising (more on that next), the franchises themselves will promote your business via nationwide campaigns that are broadcast on TV, radio, and online.

What are the advantages of franchises over small businesses?

One obvious advantage that big businesses have over small businesses is their access to increased buying power. The franchise may buy large amounts of inventory and equipment on behalf of their franchisees, meaning you’ll obtain these important assets at a reduced cost.

How much does it cost to buy a franchise?

The biggest barrier to buying a franchise is, of course, the price tag: The exact costs vary depending on the franchise, but some franchise fees are hundreds of thousands of dollars , and overall investment can easily top $1 million. Some may “only” be tens of thousands of dollars, but even that is a sizeable investment for most people. Then there are royalty fees and other startup expenses.

What is the most difficult part of owning a business?

The most difficult part of owning a business arguably comes in the startup stage, where you have to write a business plan, conduct market research, create a minimum viable product, test that product, and then scale (if testing goes well, that is). Buying a franchise helps you skip this section: The system has already been tested and proven to work. It’s now up to you to apply their system to your market.

Is buying into a franchise higher than starting a business?

As mentioned above, the costs of buying into a franchise are high—in some cases, markedly higher than they would be if you started your own business. The franchise fee alone may be out of your reach, and if it isn’t, it will take up a severe chunk of your liquidity.

Do franchises owe royalty?

In addition to the high costs of entering the franchise space, you’ll also continue to owe your franchise royalty payments for using their name and system, and will have to contribute to marketing and advertising costs at their discretion.