The idea of owning a nationally recognized business can be quite appealing for a number of reasons: you won’t have to spend many months getting your brand known, you have a corporation behind you, and you will have assistance with all of that. you do. While owning a franchise can be a means of operating your own business, consider the pros and cons before investing.
Opening a franchise business can be expensive. The average cost of franchise fees to become a franchisor is approximately $ 50,000. There’s also the cost of the equipment, building, 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 guidelines of the franchisor. The restrictions placed on you and your business may include hours of operation, where and how you advertise, number of employees, how you handle complaints, what products you can offer, and which vendors you can request.
Limited growth potential
When you buy a franchise, you may find that your future growth capacity is limited. Franchise companies often restrict territorial areas to prevent similar stores from competing with each other for customers. If you buy a franchise, be prepared to know that you will probably not be allowed to open another office or store within geographic distance of your original location. Check with the franchisor before your first purchase to understand territorial restrictions.
A franchise with a bad reputation can become a disadvantage if you buy one of their franchises. Regardless of how well you present your franchise outlet, the overall reputation of the franchise you represent may 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 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 that certain signage be placed in and around their business. This can become challenging from a cost point of view. 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 involve a lengthy process in which you will have to appear and defend your case if the franchising company requires signage that the city normally prohibits. Check with your city planning department to determine any restrictions that could affect your franchise before investing in the franchise.