Pros and Cons of Buyig a Franchise
Pros and Cons of Buyig a Franchise
1. Buying a franchise increases your changes for success.
While business ownership is less risky than some other routes to wealth, it is still risky. Buying a franchise does not eliminate the risk, but it certainly goes an incredibly long way toward minimizing it. When you buy a franchise you gain access to a successful and replicable business model, as well as franchise education, on-going training and support. Someone else has figured out the product mix and pricing, the appropriate number of employees, the best equipment, the marketing materials, and so on. All this franchise information is turned over to you. Buying a franchise can eliminate years of start-up time and money.
2. Buying a franchise can be your route to wealth creation.
Business ownership is the best route to wealth creation. Read Rich Dad, Poor Dad, or any of the books recommended on my web site, educatedfranchisee.com, or see the charts on pages 63-70 of my book, The Educated Franchisee. If you choose the right franchise, follow the franchisor’s system, and take responsibility for your own success, you can make a handsome income, and build equity, potentially leaving you with some nice retirement funds when the time comes to sell your business.
3. It’s not too late.
People of all ages from all walks of life find success through franchising. It gives young people a solid business and franchise education. Perhaps more importantly, it can be a boon for those who feel “stuck.” Franchising offers a way out for people who don’t have the time and money to experiment. They can change careers and take charge of their own success.
4. Franchisees can afford marketing that works.
Effective advertising is expensive. An individual business owner who is not part of a franchise system is typically unable to spend enough on marketing. At a food franchises I worked for in the past, $20,000 was the budgeted amount for food photography! The photography was used in stores, menus, brochures – everywhere. And when that brochure is published, the food is perfect. It actually makes the customer’s mouth water. That is powerful. With all members of a franchise system contributing to the franchise marketing budget, great marketing is made possible.
5. Franchisees get volume pricing.
Individual business owners, especially those just starting out, don’t have much purchasing power. But when a whole franchise system is involved, prices come down. Franchise owners usually enjoy the benefits of deals the franchisor makes on behalf of the entire franchise system. These discounts may apply to equipment, supplies, materials, ingredients, store fixtures, and more.
6. You’re in business for yourself, but not by yourself.
When you have a question, you can call the franchisor. Many franchisors offer a team of support people who specialize in different areas of the business. You can speak to Mary about accounting one minute, and to Ken about equipment in the next minute. And you can share notes with all the other franchisees! That is how franchise systems – and individual franchise owners – become stronger and stronger. Good ideas are being generated by your fellow franchise owners every day, and as long as you have exclusive territories, there’s every reason for that franchise information to be shared.
So why doesn’t everyone buy a franchise?
Franchising is not for everyone. It’s critical that you assess you ability to do what is required in franchising. If you decide you can’t, that’s OK – some people aren’t cut out for it. Some people need to own their own independent business, or are happier as an employee of a big company with lots of support staff. The time to discover whether or not you have a high probability of being a good franchisee is before you buy a franchise. Here are some common pitfalls.
1. Failure to follow the system.
A franchisee must be willing to follow the franchisor’s system. If you are a maverick, if you always need to be right, if your ego is a little north of ‘healthy,’ you might not be happy or successful in a franchise. New franchisees who come in with a critical eye and start tweaking things lose the time advantage they just paid for. Then, when they’ve morphed the business away from the model they bought, the franchisor no longer knows how to support them. If you need to blaze your own trail with no restrictions and have trouble following a system, don’t buy a franchise.
2. Undercapitalization.
This is the most common reason that franchisees fail. Be prudent with your investment. There are calculated risks, and there are decisions based on hope. The former is the only route to take.
3. An aversion to fees.
Once franchisees are up and running, they generally begin to take credit for their success. Concurrently, their need for on-going support and training is decreasing. They may be relying less on the national marketing – now getting some volume of business by word of mouth. They may no longer see as much value in that national brand that helped them get to where they are. That certainly doesn’t mean that the value of the brand and the marketing has suddenly decreased. Additionally, it doesn’t take into account that most franchisors amortize the cost of training to ease the up-front financial burden on the franchisees - the first few years of training probably cost a lot more than the franchisees spent in royalties. But some franchisees reach a point where they resent the royalties, marketing fees, and product mark-ups. They rationalize that if they started their own business or bought a business opportunity they wouldn’t have to make those payments. That’s true. Nor would they have received the benefits. If you think you will resent paying the franchise fees, either convince yourself that you will remind yourself of the benefits, or look for another vehicle to get you where you want to go.
4. False Expectations
Being a business owner is difficult. Franchising offers many advantages, but it is not a magic answer. It is not a guarantee. You don’t buy a franchise and sit back and wait for the cash register to fill itself. It is entirely likely that early on there will be times when you will be unnerved, times you will need to tap into your savings, times you will have to cancel a vacation, times you wish you were not the go-to person. Some franchisees seem surprised that they no longer have a secretary, a travel department, and an on-site computer repair person. Some people see business ownership as bragging rights – and don’t understand that guts that go into creating the glory.
Franchising has helped millions of people achieve their goals – over some amount of time, after some amount of effort. To ensure that you join that group, take time to assess your goals, needs, motivations, and drive before you become a franchise owner. Be honest in your self assessments, and if you believe you can overcome some hurdles you will find yourself on the road to creating the life you’ve dreamed of.
Pros and Cons of Buyig a Franchise - To learn more about this author, visit Rick Bisio's Website.
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Buying a franchise doesn’t guarantee you will reach your goals for wealth and independence, but it does improve your chances! Here are six key advantages that franchising offers – and four potential pitfalls.
1. Buying a franchise increases your changes for success.
While business ownership is less risky than some other routes to wealth, it is still risky. Buying a franchise does not eliminate the risk, but it certainly goes an incredibly long way toward minimizing it. When you buy a franchise you gain access to a successful and replicable business model, as well as franchise education, on-going training and support. Someone else has figured out the product mix and pricing, the appropriate number of employees, the best equipment, the marketing materials, and so on. All this franchise information is turned over to you. Buying a franchise can eliminate years of start-up time and money.
2. Buying a franchise can be your route to wealth creation.
Business ownership is the best route to wealth creation. Read Rich Dad, Poor Dad, or any of the books recommended on my web site, educatedfranchisee.com, or see the charts on pages 63-70 of my book, The Educated Franchisee. If you choose the right franchise, follow the franchisor’s system, and take responsibility for your own success, you can make a handsome income, and build equity, potentially leaving you with some nice retirement funds when the time comes to sell your business.
3. It’s not too late.
People of all ages from all walks of life find success through franchising. It gives young people a solid business and franchise education. Perhaps more importantly, it can be a boon for those who feel “stuck.” Franchising offers a way out for people who don’t have the time and money to experiment. They can change careers and take charge of their own success.
4. Franchisees can afford marketing that works.
Effective advertising is expensive. An individual business owner who is not part of a franchise system is typically unable to spend enough on marketing. At a food franchises I worked for in the past, $20,000 was the budgeted amount for food photography! The photography was used in stores, menus, brochures – everywhere. And when that brochure is published, the food is perfect. It actually makes the customer’s mouth water. That is powerful. With all members of a franchise system contributing to the franchise marketing budget, great marketing is made possible.
5. Franchisees get volume pricing.
Individual business owners, especially those just starting out, don’t have much purchasing power. But when a whole franchise system is involved, prices come down. Franchise owners usually enjoy the benefits of deals the franchisor makes on behalf of the entire franchise system. These discounts may apply to equipment, supplies, materials, ingredients, store fixtures, and more.
6. You’re in business for yourself, but not by yourself.
When you have a question, you can call the franchisor. Many franchisors offer a team of support people who specialize in different areas of the business. You can speak to Mary about accounting one minute, and to Ken about equipment in the next minute. And you can share notes with all the other franchisees! That is how franchise systems – and individual franchise owners – become stronger and stronger. Good ideas are being generated by your fellow franchise owners every day, and as long as you have exclusive territories, there’s every reason for that franchise information to be shared.
So why doesn’t everyone buy a franchise?
Franchising is not for everyone. It’s critical that you assess you ability to do what is required in franchising. If you decide you can’t, that’s OK – some people aren’t cut out for it. Some people need to own their own independent business, or are happier as an employee of a big company with lots of support staff. The time to discover whether or not you have a high probability of being a good franchisee is before you buy a franchise. Here are some common pitfalls.
1. Failure to follow the system.
A franchisee must be willing to follow the franchisor’s system. If you are a maverick, if you always need to be right, if your ego is a little north of ‘healthy,’ you might not be happy or successful in a franchise. New franchisees who come in with a critical eye and start tweaking things lose the time advantage they just paid for. Then, when they’ve morphed the business away from the model they bought, the franchisor no longer knows how to support them. If you need to blaze your own trail with no restrictions and have trouble following a system, don’t buy a franchise.
2. Undercapitalization.
This is the most common reason that franchisees fail. Be prudent with your investment. There are calculated risks, and there are decisions based on hope. The former is the only route to take.
3. An aversion to fees.
Once franchisees are up and running, they generally begin to take credit for their success. Concurrently, their need for on-going support and training is decreasing. They may be relying less on the national marketing – now getting some volume of business by word of mouth. They may no longer see as much value in that national brand that helped them get to where they are. That certainly doesn’t mean that the value of the brand and the marketing has suddenly decreased. Additionally, it doesn’t take into account that most franchisors amortize the cost of training to ease the up-front financial burden on the franchisees - the first few years of training probably cost a lot more than the franchisees spent in royalties. But some franchisees reach a point where they resent the royalties, marketing fees, and product mark-ups. They rationalize that if they started their own business or bought a business opportunity they wouldn’t have to make those payments. That’s true. Nor would they have received the benefits. If you think you will resent paying the franchise fees, either convince yourself that you will remind yourself of the benefits, or look for another vehicle to get you where you want to go.
4. False Expectations
Being a business owner is difficult. Franchising offers many advantages, but it is not a magic answer. It is not a guarantee. You don’t buy a franchise and sit back and wait for the cash register to fill itself. It is entirely likely that early on there will be times when you will be unnerved, times you will need to tap into your savings, times you will have to cancel a vacation, times you wish you were not the go-to person. Some franchisees seem surprised that they no longer have a secretary, a travel department, and an on-site computer repair person. Some people see business ownership as bragging rights – and don’t understand that guts that go into creating the glory.
Franchising has helped millions of people achieve their goals – over some amount of time, after some amount of effort. To ensure that you join that group, take time to assess your goals, needs, motivations, and drive before you become a franchise owner. Be honest in your self assessments, and if you believe you can overcome some hurdles you will find yourself on the road to creating the life you’ve dreamed of.
Pros and Cons of Buyig a Franchise - To learn more about this author, visit Rick Bisio's Website.
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John PowerJohn Power, founder of Biltmore Franchise Consulting, has extensive experience developing and marketing franchises and business opportunities. He has been in and around franchising for over twenty years. From 1980 through 1990 he conceptualized, organized, and developed the American Video Association. He grew AVA to 2,000 national members, before selling the company it 1990. It was later merged into another home video marketing company. From 2000 to 2005 he worked as a contract marketing and human resources consultant to several local and national companies. In 2005 Mr. Power began working as a franchise development consultant on a full-time basis. Since that time he has helped more than three dozen companies initiate and develop their franchising program. He notes that there are many companies interested in developing a franchise program, and who need his specialized assistance. Mr. Power is a “hands-on” franchise consultant. He said, “I am the ‘nuts and bolts’ person who tends to the details for my clients.” Mr. Power holds a B.S. degree with a major in Marketing. See: www.biltmorefranchise.com You may contact Mr. Power at: jpower@biltmorefranchise.co - Visit John Power's Website |
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Anne BarrAnne Barr has over 26 years experience in sales and marketing, six years as a franchisee. She has assisted over 367 business owners and purchasers to achieve their goals in career change, transition and exit strategy. She holds the designation of Certified Franchise Executive from the International Franchise Association, Certified Business Intermediary from the International Business Brokers Association and Board Certified Broker from the Texas Association of Business Brokers. Anne is active in professional organizations, networking groups and volunteers for non-profit entities. As owner/operator of four successful businesses, Anne has proven people skills and enjoys helping clients find the right "fit" in business ownership. Visit www.FranchiseOpportunitySpecialist.com for more information about me and my company. - Visit Anne Barr's Website |
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John BrennanJohn Brennan Ed.D. Dr. Brennan is President of Interpersonal Development, LLC, a training and development firm. Interpersonal Development has provided sales training and coaching to more than 3,000 sales reps from over 100 companies. A native of Australia, Dr. Brennan received his doctorate from the University of Rochester. His dissertation researched the effectiveness of Behavioral Modeling Technology in training people in interpersonal skills. While he has spent most of his career designing or delivering training, he was also a Vice-President of Sales of a training and development franchise with operations in 25 markets. Dr. Brennan has designed and delivered sales training in North America, Asia, Europe, Australia and the Middle East. He has been a guest speaker at numerous national and regional professional conferences. When Microsoft wanted Best Practices articles on sales for their web site, they called Dr. Brennan. The results are at http://office.microsoft.com/en-us/FX011387391033.aspx His firm’s clients have included Volvo, The Prudential, Merrill Lynch, Eastman Kodak, Gannett, Equifax Europe, the Economist Group and countless small businesses. - Visit John Brennan's Website |
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Jay Kubassek(Jay's Full Bio: EvanCarmichael.com/jaykubassek) In five years, Canadian-born entrepreneur Jay Kubassek went from selling mufflers at a Midas franchise to revolutionizing Internet marketing with the 2004 launch of CarbonCopyPRO, a online marketing education company, now worth over $20 million with customers in over 160 countries.
As an independent film producer, his upstart film fund Aliquot Films is currently producing a films with Spike Lee and Abel Fererra (starring Ethan Hawke and Dennis Hopper.)
Jay's entrepreneurial spirit is irrepressible. He’s the owner of five companies, a professional speaker and trainer, international real estate developer/investor, extreme sport enthusiast and emerging philanthropist. Jay resides in NYC with his wife Jamie, son Milo and dog Cooper. Visit Jay's official website: www.JayKubassek.com - Visit Jay Kubassek's Website |
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