Building your own business can be daunting. With all the work that goes into creating a business model, establishing brand recognition, and determining operations, many would-be entrepreneurs stall before they can even start. That’s where franchising comes in—it’s a tried-and-true approach to business ownership that’s enabled thousands of individuals to live their dreams as entrepreneurs.
What Sets Franchising Apart?
Think of franchising as buying a tried-and-true business blueprint. You’re not beginning from scratch; you’re partnering with a successful organization (the franchisor) to implement their proven business model in your market. You get to use their name, their systems, their marketing plan, and their ongoing support.
The catch? You’ll be charged fees and subject to their policies. But to most businesspeople, this system is the perfect balance between freedom and support.
The Real Benefits of Franchising
You’re the Boss (With Training Wheels)
Yes, you’ll be your own boss and making day-to-day decisions. But as opposed to breaking in from scratch, you’ll have a road map to follow and support system behind you. That can be the difference between feeling self-assured and lost in those initial early months.
Built-in Brand Recognition
Getting people to trust you is one of the toughest things about launching any business. When you launch a franchise, the customers already know what they are getting. That McDonald’s logo or UPS uniform is something that creates credibility that would take years building on your own.
Comprehensive Training and Ongoing Support
Few franchisors hand you the keys and say good luck. They have an interest in your business, so they typically provide:
- Initial training courses (often weeks or months in duration)
- Operations guides describing everything from hiring to inventory management
- Marketing pieces and promotional campaigns
- Ongoing support on a day-to-day basis when you are confronted with problems
Growth Potential
Once you’ve got one unit established, most franchisors encourage multi-unit ownership. It’s possibly a faster method to expand than trying to create an independent unit from the ground up.
The Cons You Ought to Know About
It’s Not Cheap
Franchise fees range from several thousand to several hundred thousand, depending on the company. In addition, there are periodic royalty fees (typically 4–8% of gross sales) and advertising fees. Make sure you understand the total amount of money you’re going to be investing before you go in.
Limited Creative Freedom
Love the idea of serving purple hamburgers or staying open 24/7? Too bad—franchise agreements typically specify everything from your menu to your hours of operation. If you’re someone who needs complete creative control, franchising might feel restrictive.
You’re Tied to Their Success (and Failures)
When the parent company is in the headlines for all the wrong reasons, your business in your neighborhood can suffer. You’re also reliant on their ongoing backing and business decisions, most of which you can’t control.
No Success Is Ever Guaranteed
Unlike some franchise sales hype, buying a franchise doesn’t guarantee success. Location, competition, management skills, and local market conditions all play a role in whether your franchise succeeds or not.
Starting Out: A Step-by-Step Guide
If franchising appeals to you and you wish to proceed with careful consideration, this is how you can do it:
Research First: Check franchises in a business you are familiar with or interested in. The International Franchise Association (IFA) is a good starting point to look for legitimate franchisors.
Interview Current Franchisees: Most franchisors will provide you with a list of current franchisees. You call them. Ask them about their experience—positive and negative.
Know the Numbers: Carefully review the Franchise Disclosure Document (FDD). This is a legal document that describes fees, obligations, and includes financial performance data from current stores.
Seek Professional Assistance: Have any contracts reviewed by a franchise attorney prior to your signing. The investment up front can avoid expensive problems down the line.
Check Your Fit: Be honest about your management approach, risk tolerance, and long-term goals. Certain franchise systems fit like a glove for some, but not others.
Making It Work
Success in franchising is as much a matter of adhering to the system and making some tweaks to your local market as it is anything else. The most effective franchisees typically:
- Embrace the training and operations procedures
- Stay actively involved in day-to-day operations
- Enjoy positive relationships with their franchisor support staff
- Highlight repeating customer experiences
The Bottom Line
Franchising is not a ticket to easy money, but it might be a sound strategy for business ownership if you are ready to play by a pre-tested system. It’s particularly appealing if you wish to be your own boss but don’t want to blaze new trails.
Don’t invest without first carefully researching potential franchisors, talking with existing franchisees, and personally finding out whether the franchise idea suits your personality and goals. Proper preparation and healthy expectations can render franchising a viable means to entrepreneurial success.