Are Franchises a Good Investment?

If you have an entrepreneurial spirit and want to start a business, you may have considered the possibility of buying into a franchise over starting your own business.  The answer to the question posed in the title of this article is that it really depends on the franchise.  There are franchise opportunities available for almost any budget.  The assumption that most investors and entrepreneurs have about purchasing a franchise is that they are buying into a proven method, rather than trying to reinvent the wheel.

Starting a new business can be intimidating, especially if you don’t have any prior experience in the particular field that the business is in.  You may have some experience working for a similar company but not as an owner.  Franchises take some of the anxiety out of this scenario because the franchisor has developed a system that works and has been replicated.  The franchisor also provides support to franchisees which is invaluable if you are a new business owner.  Other franchisees are part of a community that may even be willing to help you, rather than view you as a competitor.  Most importantly, your buying into a brand name that many people are probably already familiar with, which puts you at an advantage right off the bat.

There are some downsides to being a franchisee, however.  Because you are buying into a pre-existing system, the system doesn’t really belong to you.  You may think of yourself as a business owner but the franchisor will very often seem like your boss.  You won’t have the flexibility to make changes to your franchise the way you would if it was your own business.  Changes must first be approved by the franchisor or you can be penalized if changes are unauthorized.  The franchisor can even take legal action against you if you implement a change that they feel could potentially damage their brand or image.

Some franchisors are easier to deal with than others.  You may not always agree with the direction the franchisor is going and you will have little to no choice.  For as much as we’d like to think that the franchisor is all knowing, some have proven to be somewhat inept in certain circumstances.  Particularly if it’s a franchise that doesn’t have a particularly long history.

There is a lot of information available online about all franchises.  Once you’ve picked a franchise that is within your budget and think you would enjoy operating, it’s advisable to read all of the reviews and speak with existing franchisees that are currently operating within the system.  Get their feedback and find out the pros and cons…what they both love and hate about the company.  Some franchises can be tremendously profitable while others are a lot of work for very little residuals.

Before entering an agreement with a franchise, it may be a good idea to consult with an attorney who specializes in franchises.  This lawyer will help you to negotiate your contract.  The franchisor may tell you that their agreement is nonnegotiable, but you’d be surprised what concessions they are willing to make if your lawyer pushes hard enough.

Not all franchises are successful.  Some fail because the franchisee mismanaged the operation and others fail because the franchisor support is inadequate.  Either way, you as the investor will lose if your franchise fails.  Do your research to find out the potential of the franchise and what will be expected of you as a franchisee.

For more information about franchises, please contact Ashlar Consulting Corporation at 305-849-9399 or visit www.AshlarConsultingCorp.com.