If you are an aspiring entrepreneur, you have probably been considering whether you should invest in an already successful franchise or take your chances and start your own business from scratch. Here’s a quick look at the pros and cons of owning a franchise.
Advantages of Owning a Franchise
While franchises consistently have a slightly lower rate of failure than new startups, there are no guarantees. Still, here are some of the reasons why a franchise can give you a head start.
- Profitable Right From the Start
Since businesses offering franchise opportunities have already spent the years and dollars needed to develop successful products, build their reputation and customer base and get their companies off the ground, most new franchise locations are able to generate a profit much faster than new startups.
This is a huge advantage for the franchisee.
- Support From the Franchise
Another pro of buying into a franchise is that you’ll get strong support from the main company. You’ll benefit from national marketing campaigns, and you might even get financial support to help you through tough times when sales are down or when you need repairs and remodeling.
And many franchises will offer ongoing training programs for franchisees, managers, and team members.
- Streamlined Operations to Save Money
Aside from the quick profits and support discussed above, franchises also have high-volume distribution deals in place so that you can get discounted products and reduced costs of services.
And since time is money, most franchises have their daily operations and supply chains optimized to the max, saving you time and money on every transaction.
Disadvantages of Owning a Franchise
With so many upsides to owning a franchise, it seems like an obvious choice. But before you sign up, consider these cons of owning a franchise.
- High Startup Cost
Built-in success from the start comes with a high price tag. There are already a lot of costs of starting a new business. But on top of those, you will need to pay your initial franchise fees just to get your foot in the door.
- Ongoing Revenue Share
Along with buying into the franchise, you will also need to share a portion of your revenue with the parent company. While this might not seem like a big problem when business is booming, it can be a drag if you find yourself experiencing negative cash flow or slim profits for long stretches of time.
- Lack of Entrepreneurial Freedom
Perhaps the biggest disadvantage of running a franchise is that you don’t get to call the shots. You give up your creative freedom and have to run your business their way. While you are technically the owner of the business, in a sense you’re really just an employee who gets a bigger share of the profits.
If you’d like to know more about the pros and cons of owning a franchise, contact Star Capital USA and get the assistance you need to start and grow a profitable business.