For those considering buying a franchise, it is crucial to seek a franchise that can meet their financial, business and personal expectations. There are countless ways to search franchise opportunities whether on the Internet or utilizing a site like Franchise Grade. Without having a fundamental understanding of franchising the choice of a franchise could be the wrong one.
When considering buying a franchise, individuals should be aware of the positive and negative aspects of investing in a franchise. Although investing in the right franchise can result in far less risk than starting up a brand- new business, there are certain factors to consider. If the positive factors outweigh the negative ones than one can proceed with confidence. However, this requires that the franchise is a quality business opportunity.
The positive and negative aspects of a franchise:
Positive factors
- Buying into a proven business model.
- Can demonstrate the profitability of the franchise, provided there is a Financial Performance Representation in the Franchise Disclosure Document.
- An established brand-name
- Franchise training and support, which an independent startup business would provide
- By following the franchise system, one can avoid making the same mistakes by starting an independent business might make.
Negative factors
- Operating under a contract that requires adherence to standards and practices with little flexibility, which can limit the creative spirit of those entrepreneurs considering buying a franchise.
- With few exceptions, franchises pay a percentage of royalty and ad fund fees payments. This means variable expenses will rise with increased revenues. That will increase as revenues go up.
- The franchise company can be sold to a competitive franchise or a private equity firm that may reduce support and services.
- The franchisor may not provide the services and support promised when meeting with franchisor representatives.
- The franchisor can make changes to the franchise program, despite objections or feedback from it's franchisees.
In spite of the positive and negative factors associated with a franchise, those considering a franchise opportunity who perform proper in-depth due diligence will find the advantages of a franchise outweigh any disadvantages.
