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Should You Buy a Franchise?

Updated on February 27, 2013

Should You Buy a Franchise?

Many people who want to own a business consider buying a franchise. Some people assume that buying a franchise will guarantee their success. Although that may be true in some cases, it is not always the case. Before you decide if buying a franchise is right for you, you should consider the advantages and disadvantages of being a franchisee.

Advantages to Owning a Franchise

One of the biggest advantages to buying a franchise is that franchises have a lower failure rate than independent businesses do. The franchise's concept is already a proven success. Independent businesses have a failure rate of 70-80% during their first few years, while franchises have an 80% survival rate.

When you buy a franchise, you get a lot of assistance with the start up and ongoing operation of your business. Many franchises are known as turnkey operations. That means you get everything you need to start the business, including equipment, supplies and the necessary training to run the business. Your franchise will also benefit from any marketing campaigns conducted by the parent company and in many cases, you will receive ongoing training long into the future.

The parent company brings buying power with it. They are able to buy in bulk and you will reap the savings. Inventory and supplies can be much less costly for a franchisee than an independent business.

Brand-name recognition is also a valuable asset you can gain from buying a well-known franchise. Many customers have been anxiously waiting for one of their franchises to open up in their area.

Disadvantages of Owning a Franchise

One disadvantage to owning a franchise is the ongoing cost. Besides paying the original franchise fee and royalties, you will have to pay the franchisor a portion of your monthly revenue. You are often expected to help pay the cost of other services, such as advertising, as well.

The initial cost of purchasing a well-known franchise is often prohibitive. Unless you are able to arrange for a large amount of financing or are willing and able to invest a great amount of cash in the purchase, a popular franchise may not be feasible for your situation. Of course, there are less well-known, less expensive franchises available to purchase, but it is wise to conduct a thorough investigation before committing to those options. Most disenchanted franchisees believe that the main disadvantage to owning a franchise is the lack of control. Even though you are the owner, you will get very little input into the decision-making process. You must follow their program. Many people find that the amount of control exerted by the franchisor is more than they can tolerate. The ties that bind them to the dictatorship of the franchise are just too confining.

Is buying a franchise the right step for you? That is a decision you will have to make for yourself. Before you make any commitments, however, it is imperative that you thoroughly investigate the franchise. Have your lawyer appraise the paperwork before you sign any contracts. Franchising is not for everyone, but for the right person, with the right franchise, it can open the door to a very bright future.

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