Should You Buy a Franchise as your first business after college? Pros and Cons to Consider


Should you buy a franchise? It might seem like the quickest and easiest way to get your own business off the ground, but just as with any business, there are both pros and cons to consider before diving in. Here are some things to think about before deciding whether buying a franchise is right for you or not.

Why buying a franchise is a popular option

Buying a franchise can be an attractive option for many business owners because it’s relatively low-risk and offers instant credibility. For example, brands like McDonald’s have become synonymous with food services or Dunkin Donuts with coffee—but they started as smaller companies. By buying a franchise, you immediately gain access to everything that came before—name recognition, operational procedures, quality control systems and marketing strategies. It also helps reduce your initial capital risk since you won’t have to do all of that work yourself; instead, you can focus on managing your location and growing sales while leaving some of those higher-level tasks to someone else. If you are not interested in buying a franchise but are interested in selling your franchise or franchising your business consider using the advice from experienced franchise consultants and use a high quality directory of businesses for sale such as Businesses For Sale UK.

What are the pros of buying a franchise?

Below we will list the pros of buying a franchise of course we cannot list all the pros of buying a franchise as there are so many different perks with each different franchise for sale since not all franchises are equal but below are the main perks to buying any franchise. If you want to find out more advantages and disadvantages of buying a franchise consider reading this article.

1) Support & Training

Many franchise owners rank support and training at or near the top of their list when asked what they like best about owning a franchise. This help can come in many forms, including basic business training, ongoing strategy development, supply chain advice, marketing support and even technological tools like point-of-sale (POS) software. Though franchisors don’t provide day-to-day management of your business—that’s still your job—they’ll get you started in the right direction with some basic training that typically takes place before you open your doors for business. Ongoing support is often available as well; these resources range from simple recipe development to sophisticated database access. Some franchisors provide tech support as well, which can be especially helpful if you aren’t technologically savvy.

2) Access to a support network of existing franchisees

If you’re new to business ownership, it can be hard figuring out how to handle issues that come up, especially when they’re unexpected. Having access to an existing network of franchisees can save you time, money, and stress by sharing best practices and offering guidance. They can also help you land your first clients or customers. The franchisor will typically have a team available for training new franchisees as well.

3) Instant brand name recognition

The most important benefit of franchising is that you are buying into an existing brand name. As such, you don’t have to worry about re-creating a company culture, building out product lines or marketing your service. A franchise offers an existing structure in which you can jump in and get started making money right away. The allure of instant success is part of what makes buying a franchise so appealing. Of course, not every franchise owner succeeds—if anything, it’s more difficult for franchises because their brand image is on the line at all times. For example, if your burger restaurant consistently serves cold food or has bad service or runs out of toppings in odd hours—that reflects poorly on your franchise system as a whole.

4) Access to financing options

If you’re trying to start a business on your own, but haven’t been able to secure financing or have had trouble getting approved for a small-business loan, franchising could be an option. Franchisors might help with financing by providing low-interest loans that come in exchange for your signing on as one of their franchisees. And franchisors might be more willing than banks and other lenders to overlook your lack of business experience if you’ve got other credentials or experience they like. (Note: Franchisors aren’t likely to loan money they can’t get back; they want their franchisees’ payments—whether in fees or through sales—to keep coming.) There are also franchise companies that provide financial assistance in exchange for royalty payments from franchisees.

5) Existing customer base

Perhaps you’re interested in starting your own business but aren’t sure where to begin. Purchasing an existing franchise means you don’t have to develop your customer base from scratch—you can be up and running immediately with an established brand, infrastructure, advertising channels, etc. Although you’ll pay more for someone else’s business model, buying a franchise is one of quickest ways to get into business without having to start from scratch. If you’re thinking about buying a franchise, it’s important that you interview franchisees on what owning their particular franchise has been like so that you know exactly what it entails.

What are the cons of buying a franchise?

Below we will list the cons of buying a franchise since now you know the positives its important to make an informed decision before investing by also knowing the disadvantages of owning a franchise business instead of your own independent business venture.

1) Less control over your business

One of the biggest benefits of owning your own business is that you call all of your own shots. But with a franchise, someone else has made all those decisions for you. This might be okay if their vision aligns with yours, but there’s also no guarantee it will—especially if you don’t do your homework on a company before buying in. For example, is its product or service something you want to sell? Is it reputable in its industry and among consumers? Does its brand resonate with customers? Once all these questions are answered, then it’s time to talk terms: who owns what percentage of your business (and profits), how long can you remain an owner without paying royalties and renewal fees, etc.? The list goes on.

2) Ongoing franchise royalty fees

If you’re considering buying a franchise, understand that you’ll probably have to pay ongoing fees. The fees vary depending on which franchise you choose, but they are typically 2-5% of your annual sales. These fees will continue each year as long as you maintain your agreement with that franchise company. While these may be some of the biggest up-front costs associated with becoming an entrepreneur, if done right, it could also mean an ongoing stream of revenue for years to come.

3) Start-up costs can be expensive

One major drawback of buying a franchise is that it’s often far more expensive than starting your own business from scratch. While you can buy an existing business, it could cost you as much as $1 million or more, depending on its size. The good news is that some franchises require less capital; others don’t ask for any up-front money at all (i.e., they charge monthly fees instead). Depending on which model you choose, though, costs may be high—especially if you’re required to purchase everything (furniture, signs, etc.) under their brand name rather than choosing your own products.

Would buying a franchise be right for you?

Buying a franchise can be an easy and relatively stress-free way of starting your own business. However, you’ll want to make sure you have both enough startup capital—typically between $30,000 and $150,000—and sufficient experience in your industry. Most franchises come with proven business models that serve as guidelines for successful operation. Before jumping into anything, learn more about what is required of franchisors by checking out trade organization publications or franchise directory websites like Franchise UK. Be sure you don’t overextend yourself financially or legally by researching what kinds of contracts are typical for various sectors (including purchase agreements, non-compete clauses, licensing restrictions) so you can better protect yourself in negotiations. We hope this article helps you to see why buying a franchise is usually a great option for getting into business especially if you are new to running a business.