The idea of owning a nationally recognized business can be quite appealing for several reasons: You won’t have to spend many months building your brand, you have a corporation behind you, and you’ll have assistance with all of that. You Do It While owning a franchise can be a means of operating your own business, consider the pros and cons before you invest.
Opening a franchise business can be expensive. The average cost of franchise fees to become a franchisor is approximately $50,000. There is also the cost of equipment, construction, overhead and marketing supplies. You may also have to pay annual royalties or franchise fees to the company.
Owning a franchise often means following the franchisor’s guidelines. Restrictions placed on you and your business may include your hours of operation, where and how you advertise, the number of employees, how you handle complaints, what products you can offer, and which vendors you can order from.
Limited growth potential
When you buy a franchise, you may find that your ability for future growth is limited. Franchise companies often restrict territory areas to prevent similar stores from competing with each other for customers. If you buy a franchise, be prepared to learn that you probably won’t be allowed to open another office or store within a geographic distance of your original location. Check with the franchisor before your first purchase to understand any territorial restrictions.
A franchise with a bad reputation can become a liability if you acquire one of its franchises. Regardless of how well you present your franchise, the overall reputation of the franchise you represent can outweigh your good intentions.
Advertising costs and restrictions
In many cases, a franchise will require specific ad styles and placements and pass the cost on to you. Sometimes the corporation actually places the ads and then sends you an invoice. At other times, you are prohibited from advertising in local publications, which may prevent you from reaching certain potential customers.
Franchisors generally require certain signage to be placed in and around their business. This can become challenging from a cost standpoint. The city where your franchise is located will have to approve any signage you plan to use on the side of your building or on your property. This can be a lengthy process where you will have to appear and make your case if the franchising company requires signage that the city normally prohibits. Check with your city planning department to determine any restrictions that might affect your franchise before investing in the franchise.