Challenges A Franchise Has Over Other Small Businesses

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Buying a franchise versus a startup has its advantages. First, it’s already established and successful, so getting the company name out there is not a concern. This also translates to much less in out-of-pocket expenses for promoting your business as an already established brand. Secondly, ownership comes with the ability for extensive training, doing away with the need for creating an employee manual, which can take many hours to complete. And, third, since people already know and enjoy the product or services offered, the chances of achieving success are greater. However, buying a franchise comes with other challenges, many of which are unique to this type of ownership, as well as the risk of failure.

Startup Fees

While there are some franchise businesses that cost far less than the big names, you still go through a stringent process to get approval from the company (franchiser). Having access to a large amount of both liquid assets and capital are essential to make the approval process easier. In addition to the buy-in fee, you will also need to come up with a franchise fee, a royalty fee and in most cases an advertising fee. Basically, you need to prepare to hand over a lot of money during the first few years to become successful and turn a profit. Plus, there are promotion and advertising expenses. Luckily, you can use outside sources such as a franchise SEO that specializes in established brand names.

Managing a Pre-Existing Format

Buying a successful franchise comes with a set of guidelines and rules for operating the business. The good news is that it saves you from having to start at square one and go through the trial and error process. However, if you have a lot of creative thoughts racing through your mind and want to improve upon the existing procedures or products, a franchise is not the type of business for you. The plain and simple truth is that the franchise already has the business running the way they want it.

Managing the Business

Many people who buy a franchise have no business experience at all. They have the money to invest, but no skills to achieve success. The brand you purchase is a household name and customers will expect the services they enjoy at other locations. Thankfully, most franchises offer extensive training in recruiting the right help and how to manage the business. They also have a company manual that you can reference as needed should you come across a problem that you want to resolve. Remember, that anyone you hire must follow the company policies to the tee.

Reputation

It’s important to do a complete background check on the franchise that strikes your interest prior to signing a long-term contract. This means not only their profits over the last few years but also their rate of satisfaction with the general population. Unfortunately, even if you run your operation smoothly and have a high rate of customer satisfaction, you can potentially lose business due to a few bad apples that own the same name. In this case, one bad headline can reduce your sales to a dangerous level and possibly cost you to lose the business completely.

Read the Documents Carefully Prior to Signing

Unlike opening day when you own your own startup business with a pre-planned set budget, the owner of the brand may want to go overboard, at your expense. Perhaps in their eyes, a few balloons don’t quite drive the population to the front doors as much as free giveaways. With a large thick booklet in hand, you may decide to skim through it and miss a lot of obligations and additional fees. If you don’t have the time or lack the knowledge to understand the writing, hire an attorney who specializes in franchise operations. This way you know ahead of time exactly what lies ahead and can make an educated decision prior to signing the documents.

There are pros and cons to opening any business. However, if you want to reduce the risk of failing in the first few years but want to go into business on your own, a franchise can provide a wonderful opportunity to enjoy a comfortable lifestyle. Just make sure that you buy into something that interests you and that you weigh all the pros and cons of owning a franchise ahead of time.

A post by Ryan Kh (396 Posts)

Ryan Kh is author at LeraBlog. The author's views are entirely his/her own and may not reflect the views and opinions of LeraBlog staff.
I'm Ryan, a business graduate with specialization in finance and marketing. After receiving bachelor degree, currently I am pursuing my master degree in IT cause I believe IT skills are very important in the contemporary business world. I'm passionate about writing stuff and blogging on Business / Tech / Marketing (like strategic decision making and digital business strategy) to intensify my skills.

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