Is a Franchise the Right Opportunity for You?
Oct. 19, 2018
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 franchises 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, that typically have an established customer base. This has 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 into 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 regulations. 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.
Established customer base
Lower cost to market
Lower failure rate as a start-up
High investment fees
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 for your FREE CONSULT today.