Franchise

Is a Franchise the Right Opportunity for You?

Owning and operating a franchise has many pros and cons. Is owning a franchise the right opportunity for you?

Let’s take one example, perhaps you are looking at opening a bakery/coffee shop. With a constantly expanding metro area, a coffee shop sounds like a good year-round business that would maintain a consistent customer base.  There is a high demand for the product throughout the year, renting a shop is relatively inexpensive and labor costs are low. Should you start from scratch or go with a proven model? You may want to ask yourself this question first, “Is a franchise the right opportunity for me?”

Discovering if a business venture is right for you requires a risk analysis process. In my years as an attorney I have done business with several franchisees in the Kansas City area. Deciding whether owning a franchise is right for you, does not always come with a clear-cut answer.  By weighing the pros and cons of joining a franchise you can make the decision that best suits your business goals.

One of the largest benefits of owning a franchise is brand recognition. Franchises are typically well-known companies, who typically have an established customer base. This has a cost savings in marketing and saves time and effort of building a reputation and attracting new customers. Additionally, operating a franchise comes with support from corporate in the form of training, marketing and even financing.

There are a few drawbacks of buying in to a franchise as well. The initial cash outlay is typically higher than starting from scratch.  You likely will be paying a percentage of your gross sales back each month in royalties to the franchisor. You will be required to contribute to a marketing fund as well and will likely be subject to franchisee rules and regulation.  Additionally, if you’re a franchise owner and looking to sell your business it is not uncommon for the franchisor to have approval power over the buyer.

Below I’ve put together a few of the Pros and Cons of operating under a franchise that I have witnessed in the Kansas City metro through different clients.

Pros

Cons

  • Brand recognition
  • Established customer base
  • Lower cost to market
  • Corporate support
  • Buying power
  • Lower failure rate as a start up
  • High investment fees
  • Royalties
  • Marketing fees, contributions
  • Less privacy and freedom
  • Franchise resale terms
  • Rules and Regulations
   

Are you contemplating purchasing a franchise? Buying a franchise is like buying any other business in that you have to do your due diligence and investigate the franchise fully.

If you are looking for a Kansas City business attorney, contact Jeff with the Coppaken Law Firm at 913.225.8951 for your FREE CONSULT today.


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