McDonald’s, Subway, and Chick-fil-A all have one thing in common – they are franchises with proven track records. But is a franchise right for you? Let’s look at the pros and cons:
Pros:
Proven model of business success: Established franchises have a proven model of success that makes it easier for you to be successful. The franchisor takes the guess work out of marketing, which items to sell, systems, and how to operate your business effectively.
Multiple locations: Because of the standardization of the franchise model, it makes it much easier to own and run multiple locations because each location is virtually identical. There may be some minor differences, such as size, but it’s almost like having twins.
Potential to be a passive business: Depending upon the franchise, you may be able to take a more passive role in a franchise business. However, some franchises do not allow this, such as Chick-fil-A, but many do.
Cons:
Capital requirements: Aside from an upfront franchise fee, many successful franchises require you to have a lot of liquid capital before purchasing a franchise. Although this is a very, very smart move on the part of the franchisor, due to the high correlation between undercapitalized businesses and business failures, this requirement makes is harder to purchase some franchises. However, there are many franchises to choose from and the capital requirements and fees vary considerably.
Independence and creativity: Due to the strict model of owning a franchise, you are less able to be “creative.” For example, if you own a McDonald’s franchise, you can’t decide to just add bison burgers to the menu without approval.
Franchises can be a good way to become an entrepreneur or to expand your entrepreneurial empire, but you must weigh the pros and cons to make sure that it is right for you.