Evaluating & Buying a Franchise

Advantages and Disadvantages of Franchising

An Introduction to Franchising

The Pros and Cons of Owning a "Pre-Existing" Business

Just like any other business structure, a franchise is no exception to the rule of having both advantages and disadvantages associated with owning such a business. While our list will actually make the distinction between classifying such factors as being either beneficial or detrimental, we realize that what might be a negative feature to one person, might actually be considered a positive trait to another individual. Therefore, some features will actually appear under both headings with additional clarification provided.

Advantages of being a franchise owner

• Access to specific vendors has already been established
• Built-in customer base
• Built-in support network
• Business niche has already been identified
• Greater clout, connections, and/or assistance for obtaining financing
• Less time and energy is potentially involved in the start-up process
• Lower risk generally involved
• Many decisions are made for you
• Pre-established guidelines for business operations already exist which provide you with a working structure
• Recognized business name and reputation
• Training provided

Disadvantages of being a franchise owner

• Access to specific vendors has already been established and interactions with others might be restricted
• Business agreement can be terminated
• Business longevity is directly related to the success of the entire company
• Business niche has already been identified and potentially cannot be altered directly by you
• Franchise problems (e.g., tax liabilities, lawsuits) that arise, but that aren't directly related to your own branch of operation, can actually directly impact you
• Growth of the business is potentially restricted by the entire franchise
• Many decisions are made for you which can equate to you having less control over such factors as which employees to hire, what products to sell/services to offer, the layout of the store, etc
• Potentially more costly, both in upfront costs, as well as from royalty payments, etc that might be required
• Pre-established guidelines for business operations already exist which you are required to follow and not deviate from
• Renewable agreement might contain different terms than the original one

We recognize the fact that not all franchisors offer the same level of input, support, etc as others. On the opposite side of the pros versus cons equation, we also acknowledge that many franchisors are also not as restrictive as others might be. Therefore, we encourage you to alter the list so that it best matches your perspective in relation to owning a franchise, as well as it's based on the attributes associated with the franchise(s) you're considering purchasing.

By thoroughly investigating the various franchises that interest you, you'll be able to refine this list repeatedly. Such an evaluation will provide you with the critical knowledge and insight that you need to assist you in determining if the advantages outweigh the disadvantages in your consideration of owning a specific franchise. If knowledge is power, this type of knowledge truly does have the power to propel you into being a successful franchisee.