Entrepreneurship: Is Franchising Right for You?

The word franchising in gold with black background. Photo courtesy of Shutterstock.

Whether you are in the process of graduating, or still have a ways to go; there is no doubt you are thinking about your job prospects. You may be searching for entry-level jobs in your chosen field, or you could be in the midst of a promising internship. Another option is to start your own business using the skills and experience that you have gained in your years of study.

Starting a business could seem like a daunting task, especially in a tough market. However, buying a franchise could give you an advantage over your competition.

If you are interested in starting a franchise, here are some things to consider:

Pros and Cons of Starting a Franchise

·  Pro: An Established Name: Buying an established franchise means your company already has a presence in the community. You can capitalize on the popularity of the brand to drive traffic to your location in a way you can’t when starting a brand-new business.

·  Con: Guilt by Association: If the main corporation has a public relations problem, it could negatively affect everything associated with the company – including the franchises.

·  Pro: A Proven System: By the time you join the team, the franchise has already done all the work, and made all of the mistakes, regarding sales, marketing, and general business operations. As a franchisee, you are essentially walking into a business that is already established and ready to run almost from day one.

·  Con: Less Freedom: Franchisees are required to follow the operating procedures and practices, and make business decisions based on franchise guidelines. This is done in large part to reinforce the brand, and ensure that the customer experience is the same across the board.

·  Pro: Franchise Support: As a member of a franchise you have access to support from the corporate office, and from your fellow franchisees. The support can take several forms including sales training and seminars, as well as marketing and advertising support.

·  Con: Higher Start-Up Costs: The costs of opening a franchise could be higher than starting a business from scratch. However, you should remember that, when you buy a franchise, you’re not just buying a business; you’re also buying the right to use an established name, an established reputation, and a proven system. In the case of a franchise as big as UPS, you are partnering with a brand so big it can be identified by a single color… that’s not something a low cost startup can replicate. Additionally, some companies could offer financing, start-up bonuses, and other financial assistance to new franchisees.

·  Pro: Lower Inventory Prices: When it comes to price negotiations, franchise members have an advantage over independent businesses because they have collective bargaining power. Additionally, the franchise could also have agreements with set vendors that offer better pricing.

·  Con: Fees and Royalties: Franchises are required to pay fees, or royalties, to the main office in exchange for the use of the company’s name, product, and business support. The amount of the fee varies, but it is usually paid each year out of the profits from your sales.

·  Pro: Easier Employee Recruiting: Having an established name not only means more customer awareness, it also means greater awareness from potential employees. Your reputation will provide you with a larger applicant pool, making it easier to find the right people.

If you work well in a team environment, have some business acumen, and have the means to handle the start-up costs, a franchise could be the option for you.