Pros and Cons of Becoming a Franchisee 

Owning your own business is an exciting prospect, yet it can be a journey riddled with challenges and uncertainties. If you are seeking a route that combines entrepreneurship with an already established brand and business model, joining a franchise may be the route for you. This article will explain the advantages and disadvantages of becoming a franchisee so that you can decide whether owning a franchise aligns with your entrepreneurial vision. 

Advantages 

1. A Proven Model for Success

One of the most compelling reasons to consider owning a franchise is the assurance of a proven business model. Franchise opportunities tend to come with a pre-set business plan and track record of success. You will be adopting a tried-and-tested formula that has a level of market viability. 

2. Established Brand Recognition 

Building brand recognition from scratch can be arduous, with no guarantee of eventual success. On the other hand, franchise opportunities offer the advantage of immediate brand recognition. Customers are more likely to trust a known brand, which can significantly reduce the time and effort you need to establish a customer base.

3. Training and Support

Some franchise opportunities do not require you to have previous industry experience. This is partly because franchisors will train you and provide support. You should receive guidance in various aspects of running the business. 

All franchisors should offer initial training and ongoing support. The level of training and support franchisors grant can vary across franchises. Before signing, check the level of support a franchisor will provide to you within the franchise agreement. If you feel you need more help, you can negotiate this.

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Disadvantages 

1. Lack of Independence 

Aspiring entrepreneurs typically desire freedom. They may seek: 

• financial freedom;
• the freedom to innovate; or 
• the freedom to shape their business’s direction independently. 

However, the nature of the franchise means that franchisees must operate within the confines of set guidelines. Franchisors set a framework for you to work within, and this framework ensures a consistent brand identity across the franchise network. 

Lack of independence is not entirely a disadvantage. Some people find the foundations to thrive within set boundaries and instruction. Whether the restrictions impair you or encourage you to achieve will depend on your personality and aspirations as a business owner. 

2. Costs and Fees

Much like other forms of business venture, franchising comes at a cost. Costs come in the form of payments to the franchisor. The first will be a significant initial investment. This initial fee will cover the expenses to set up your new unit and purchase the rights to operate under the umbrella brand of the franchise. You will also pay ongoing payments you will owe to the franchisor. The amount you will owe continuously typically depends on the amount of profits you make. 

3. Risk of Franchisor Issues 

As a franchisee, you operate an independent business within the franchise network. As your business will operate under the umbrella of the franchisor’s brand, the success of your franchise is closely tied to the performance of your franchisor. Factors that can impact your success as a franchisee include:

• supply chain robustness; 
• the level of training and support offered by your franchisor; and
• whether the franchisor encounters financial or legal problems.

For example, suppose your franchisor encounters financial difficulties. This can lead them to draw back critical support services previously available to you. Perhaps this resulting support reduction negatively impacts your ability to attract and retain customers.

With any franchise opportunity, remember that no franchise comes with a guarantee of success, even if the franchise owner can show you a history of fantastic success and attractive prospects. 

Key Takeaways 

Any franchising journey comes with a blend of advantages and disadvantages. The following table provides a brief summary of the advantages and disadvantages of franchising. 

Ultimately, becoming a franchisee should align with your aspirations and financial capabilities. The disadvantages raised in this article underscore the importance of conducting due diligence before signing a franchise agreement and making large investments. This means to:

• research the franchise; 
• talk to other franchisees; 
• carefully review the franchise agreement and franchise disclosure document; 
• check the financials; 
• ask questions; and
• consult with experts like lawyers and accountants. 

If you require legal advice on your journey to owning a franchise, our experienced franchise lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.