Owning A Franchise: Is It Financially Right For You?

Owning a franchise can eliminate some of the common financial challenges that come with starting a business, including how to predict customer demand, sales cycles, or develop a sense of brand awareness. But, owning a franchise may also require a significant upfront investment to secure rights to a specific geographic area associated with a franchise — as well as ongoing payments to maintain franchise ownership.

For those reasons, it’s important to consider the pros and cons of being a franchise business owner before deciding it’s the best option.

Here’s a look at what owning a franchise really entails — and whether it’s the right financial fit for your wants, needs, and goals.

Owning a Franchise Benefits

  • Reduced uncertainty. One of the biggest owning a franchise benefits may very well be the fact that a franchise business model can reduce uncertainty that is an inherent aspect of being an entrepreneur. A franchise essentially provides a proven template for the most efficient and profitable ways to run the business, while sparing the owner the time, money and risk that comes with introducing a new idea, brand or business model to market.
  • Invest less time (and money) getting off the ground. Franchise models offer business owners extensive pre-opening support, including assistance with selecting a business location, securing the help of qualified contractors, pre-negotiated contracts with suppliers, and preferred purchasing agreements with specific vendors that may include bulk discounts based on the purchase volume of the entire franchise. While a small, locally owned business may have to delay opening for months simply to secure the services of a reliable (and budget-friendly) contractor, franchise business owners already know what look, feel, products and services will best work for the business model — and have the resources to bring it to reality, whether the sales channel is online, in store or omnichannel.
  • Increased ability to attract qualified employees. Recruiting qualified employees can be a challenge for small business owners who don’t have an established presence or brand recognition in their community (and may not have the financial resources to offer the most desirable compensation package). By comparison, a franchise location may have to do very little to attract qualified applicants, thanks to brand awareness and market support. Further, many franchise models include training and support for new hires, along with employee handbooks and career pathways designed to encourage employee retention.

Owning a Franchise Challenges

Despite that franchise models reduce much of the uncertainty that comes with owning a business, owning a franchise challenges often stem from lack of control — particularly in areas that have a direct impact on their bottom line. For example:

  • Lack of creative freedom. Franchise business owners may feel frustrated by the lack of creative control they have over marketing materials, messaging and promotions they can put into the market — or how much they spend on them. Franchise business owners may also be forced to switch suppliers or vendors at the direction of the franchisor, regardless of how well the relationship may work at their particular location.
  • Predetermined property needs. Franchise owners may not be able to build or expand their business in the location they choose, or open additional locations, without approval from the franchisor. If the franchisor determines that all franchise owners must make updates to the design and layout of brick-and-mortar locations and/or web properties, individual franchises may have no choice but to invest in them — even if that means disrupting business or sacrificing cash flow.

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