The Pros and Cons of Buying a Franchise, Part 1: Franchise Pros

franchise pros, franchise, buying a franchise, Naperville business planning attorneyWhat do McDonald’s, GNC Live Well, Tim Hortons, and Meineke Car Care Centers all have in common, besides being nationally recognized brands? They are all among the most successful franchises in the world.

A franchise is a business structure that permits private owners to buy the rights to open and run locations of a much larger parent company. For many entrepreneurs, opening a new location of an existing franchised brand is a very attractive proposition, as it may provide the opportunity for substantial profit without having to start completely from scratch.

Part 1: Franchise Pros

As a business law attorney in practice for over 30 years, however, I assure you that buying a franchise is not for everyone. Before you take that leap, consider some of the positives and negatives of such an idea. In a future post, I will address some of the disadvantages, but for now I will start with some of the pros.

Brand and Name Recognition

Right from the beginning, an established franchise will have a pre-existing customer base, at least to some extent. You may need to let the public know that you have opened your doors, but, depending on your particular industry, educating would-be consumers on your products and services will probably be less demanding than if your started your own, non-franchise company. In many cases, your franchise fees allow you to benefit from national advertising campaigns and other high-level marketing plans.

Proven Model

When you buy a franchise, you, of course, will need to be sure that there is a market for the particular products and services in your area, but you will not need to wonder if the business system will work. The fact that a franchise exists means that a successful, replicable model has been created with a proven track-record. In most cases, formal training from the franchisor will be readily available, if not required as a term of your contract. You will have the opportunity to learn exactly how and why the company is profitable and what you need to do to ensure your location is as well.

Support and Buying Power

Since many franchise agreements include percentage-based royalties to be paid to the franchisor, it is the parent company’s best interest to help you succeed. Therefore, the company is likely to offer guidance on selecting a location, maximizing your efficiency, and troubleshooting any problems that may arise. The franchisor can also assist you with fairly accurate start-up cost estimates, and connect you with preferred suppliers. Large franchises often have significant purchasing power with many companies, which they can use to benefit many of their franchisees.

Know the Legal Ramifications

Buying a franchise is a major decision, and one that should not be made without consulting an experienced Naperville business law attorney. Our team can assist you in developing clear goals and objectives, and will review any and all franchise documents before you sign them. Contact our office today to schedule a consultation and let us help you make the best decisions for your commercial future.

 

Sources:

Franchise Direct

Chron Small Business

National Federation of Independent Businesses

BPlans.com