The Pros and Cons of Purchasing a Franchise

Thinking about how you can take your annual income to the next level? You may have heard about some of the advantages buying a franchise offers.

 With the economy waking up from its COVID-induced hibernation, lots of business-savvy entrepreneurs, investors and leaders are taking interest in buying franchises. A well-managed franchise affords predictable revenue and costs and can be a reliable framework for rapid scaling. Smart business leaders can turn a franchise strategy into a powerful stream of passive income.

 However, buying a franchise isn’t for everyone. More locked down than other entrepreneurial endeavors, some creators and thinkers don’t like the regulations and rules you have to respect when operating a franchise. By contrast, other businesspeople appreciate the sense of structure.

 Here are the pros and cons of purchasing a franchise for you to consider.

 Con: Royalties

 It is standard for a brand to charge ongoing royalty fees to their franchisees. This can be between 4% and 6% of the yearly gross revenue. This is something to consider when determining how much you can make off of a franchise and should definitely be a question when selecting a franchise brand. One of the great things about working with a professional broker in the space like TEC Resource Center is that we can help you do the math and evaluate options from a cost to revenue perspective.

 Con: Limited Creativity

 For the same reason buying a franchise is great for someone not interested in establishing something new, owning a franchise might not be for someone who loves to create. Franchises often have strict rules and procedures for how certain things need to happen, so there are limited options for you to make changes or innovate if you have a mind to do so.

 Con: Lack of Control

 Many franchises require strict adherence to inside processes. For example, many fast-food franchises require you to purchase basic ingredients directly from them. These items could easily be purchased elsewhere, but the agreement requires you to purchase from the brand. This is something to consider when you are choosing your franchise brand. At TEC Resource Center we know how to help our clients safely navigate and evaluate the kinds of risks.

 Con: Outside Reputation

 There are a lot of good things about being a part of a larger brand, but it also means that a lot of things are out of your control. If other locations, or the brand as a whole, gets bad publicity for any reason, that can reflect negatively on your location and decrease sales even though you haven’t done anything wrong.

 Pro: Proven Product

 One of the best parts about buying a franchise is that you are joining a business after the product has already been tried and tested. Why go through the time-intensive, risk-laden process of inventing your own company if someone else is already offering you theirs? Franchised brands are already successful, so there is a lower risk when selling their product.

 Pro: Established Marketing

 If you purchase a popular brand, you also purchase all the marketing that already exists. McDonalds is the prime example. When you buy a franchise, you already have the reputation and international branding that McDonalds has accumulated over years in the fast-food business. At TEC Resource Center, we provide you with a simple comparison of all the brands available so that you can make the most informed decision possible when choosing your franchise.

 Pro: Fewer Decisions

 When you start a business from scratch, you have to determine the processes and branding. You have to choose a mascot, the motto, the color scheme, everything. When you purchase an established franchise, all of that work has already been done for you. That makes purchasing a franchise a great option for someone who thrives on management more than creation.

 Pro: Ongoing Support

 Working with a franchise is a great option for businesspeople hoping to succeed in an industry where they might not have as much experience. Franchisors will often provide the training and direction necessary to get started, so you don’t need to have a lot of experience or knowledge in the field. This is also great for highly experienced businesspersons who don’t want to dedicate the time or bandwidth to learn something new. The direction provided by the franchise cuts out a lot of that personal research and time that a new product or business requires.

 Pro: Easier Access to Funding

 Because a franchised brand is already established, banks feel more confident in your ability to follow through on a loan. You are much more likely to have a loan for a franchise approved than for a new brand or product. Having access to this kind of capital means that you are free to scale your franchise strategy much more than if you were running your own business.

 Pro TIP: Get Professional Help

 There is a lot of information you need to collect when deciding which franchise you want to purchase. Some of that information isn’t always available to the average person, so hiring a professional is the best way to set yourself up for success. Expert franchise advice, like we offer here at TEC Resource Center, can help you locate the best deals, highest quality brands, and be a mediator as you negotiate with a brand. This can result in thousands of dollars in savings, and even more savings in hassle and headache.

 The best part? This service comes at No Cost to you! A franchise broker acts as an intermediary between the franchisor and the potential franchisee (You). We are paid by the seller (Franchisor) if and when a franchise is awarded.

 If you have additional questions about how purchasing a franchise could double or triple your yearly income, schedule a free 15-minute call to speak with an expert at the following link - TEC Schedule