Can anyone tell me the pros and cons of franchising businesses?

Question

I'm looking into lots of franchising businesses but I do not know which industry is worth the time and money to invest on. All of them seems very promising on the books, but I have heard horror stories on many of them. Can anyone that owns any franchise business provide me an insight on my question?

Answer 1

Here are my thoughts as a former franchisee and someone who's done extensive research on franchising:

Whether it’s worth investing in a franchise can only be answered after the fact. The best way to truly assess whether to buy any franchise is to speak directly with several (at least six, preferably more) franchisees for the company you are considering.
A self-examination as to whether owning a business is what you really want is also essential, as is a very thorough due diligence. Here are 10 steps that should be taken by anyone considering investing in a franchise:

1 - Conduct due diligence on yourself
2 - Find a great accountant
3 - Find a great attorney specialized in franchise law
4 - Conduct due diligence on the business
5 - Refresh and enhance your business acumen
6 - Write a business plan
7 - Identify and hire a great team- then create a culture to retain it
8 - Hone your leadership skills
9 - Hone your sales skills
10 -Create a schedule that allows some time for family and friends

Some other information you may find helpful:

Most franchise contracts are 10-year commitments for which the franchisee has virtually no rights. They're structured such that the franchisee has very little latitude or say in how the business is operated. You have flexibility to hire your staff, manage them and set your own prices, but most everything else, from displays to products you may/may not carry to signage/advertising, equipment, technology, etc. is usually either governed by or subject to the approval of the franchisor. It's not like owning your own business, it's more like being a store manager who, if the business is profitable, takes home most of that. And if the business is not profitable and you want to sell it or close it after five years, these are both very difficult to do. The former is usually via either a very large fee (an example is a local franchisee who paid $100,000 to terminate his franchise contract with one of the more popular women's fitness center franchises) or personal bankruptcy (franchise contracts generally require you that you be personally liable your business debts, not just through whatever type of corporate entity you might establish; e.g., LLC, S Corp., Partnership, etc.). The latter option of selling your franchise is generally accomplished only at a very large discount.

There are dozens of things to investigate when considering investing in a franchise, but here are some fundamental questions to ask current franchisees:

About how many hours per week do you dedicate to your franchise business?

How would you describe your relations/communications with your franchisor?

Is the franchisor fair with you in resolving any grievances?

Are territories equitably granted?

How would you describe the initial and ongoing training provided by your franchisor?

In what ways could the parent company most improve?

Is your income A) more, B) less or C) about what you expected prior to opening your business?

If you could turn back time to the day you signed your franchise agreement, would you make the same decision to buy your franchise?

The last one is of course the most important. There are many very happy, wealthy franchisees out there, but it's not a guaranteed formula for success. Every opportunity is unique and requires extensive due diligence of both the franchise itself as well as the regulations governing the industry. If you have more specific questions, please feel free to contact me.

Good luck.

Answer 2

A PROVEN franchise will skip you past all the trial and error startup time that you would normally spend a lot of time and money on with little results. They have people that know exactly what kinds of locations to look for, sometimes they will even help negotiate a lease for you. Also as a franchisee, you may be able to take advantage of special pricing from larger vendors due to the size of the overall company. There is more name recognition for your business than with a one store business.

On the other hand, you have to pay them a percentage of your sales each month. They may have a contract that you have to follow certain guidelines and feel that you are not really in charge of your business. The franchise fee can eat up a huge portion of your startup capital to gain their experience.

Answer 3

Depends on your timeline and the area you are interested in. The biggest challange is to come up with the start-up money.. This is differenet from precentage mentioned in the previous answer. I looked into this last year working through a company that facilatates linkages and help you explore several fanchises (at no charge to you).. I was looking at computer services type of fanchise, you end-up having to come up with to 100K the first year.. I suspect it may be similar for other areas

Answer 4

I owned a franchise for 3 years, and that i must assert that I felt very undesirable about the royalties and expenditures I paid out. I do each of the artwork and that i pay them? My franchise replaced into no longer heavily marketed, yet I nonetheless had to pay month-to-month. be particular of what you're going to get, how a lot you'd be paying and how lengthy y ou could get out of the deal. verify and recheck each thing and under no circumstances signal something with out reading it thoroughly and making particular that you recognize each thing.