Franchise Benefits and Problems

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Franchise Benefits

• Known costs. When starting your own business, costs can unexpectedly exceed expectations, Keefe explains. With a franchise, you know exactly what costs are going to be.
• Guidance on location.
• Guidance on purchasing, and on the quantity and types of goods used.
• Established relationships with reliable suppliers. And, you'll likely have better pricing, thanks to the franchise's stronger purchasing power.
• Some franchises provide training and problem-solving assistance. They can help in goal setting and other business-related issues.
• An already established brand, resulting in a built-in customer base. Some franchises will also provide leads and other sales-related support, like call centers.
• The assurance that all legal issues have been addressed.
  

Now for the promised cons. In addition to potentially onerous royalties and high initial investment costs, other downsides can include:

Franchise Problems

• Some folks aren't temperamentally well suited for franchising. If you're extremely entrepreneurial or creative, you'll likely chafe at the restrictions posed by all but the most hands-off franchise (and even these rarities may prove too restrictive).
• Typically, you'll have no control over the goods you use and the cost of these goods.
• There may be restrictions on what other kinds of businesses you can become involved in or operate, as well as limitations on employment in related fields.
• If you're a trade/craft-oriented franchise, such as plumbing or painting, you may have little say over the jobs you can take or turn down.
• Possibly higher marketing costs that could have slight value to you at the local level. For example, a Super Bowl ad: You may think it doesn't improve your sales but you may have to pay your share for its cost anyway, says Keefe.
• Spillover. Bad press created by another franchisee can negatively impact your business.