What’s the franchise?

A franchise is a type of license that grants a franchisee access to a franchisor’s

proprietary business knowledge, processes, and trademarks, thus allowing the
franchisee to sell a product or service under the franchisor’s business name.
.Pro #1: Franchises come with a ready-made business plan.
If you want to start a business but you don’t relish the process of crafting a business
plan, choosing what to sell, decorating your store and all the other minutiae involved
in setting up an independent shop, buying a franchise might be good option for you.
Becoming a franchisee offers a lot of the benefits of starting a small business without
some of the start-up headaches.
Pro #2: Starting a franchise can make it easier to secure financing.
Some franchised businesses have their own financing arm, meaning that they
provide loans for people who want to buy and open a franchise. Now, in-house
franchise financing might not always offer the lowest interest rates, and it’s always a
good idea to comparison shop. But if you think you might have a tough time getting a
traditional small business loan from a bank, going the franchise route can be a good
work-around.
Pro #3: Franchises are less risky than independent businesses.
If you buy a franchise, you already know that the product is successful. It has brand
recognition, for one thing. Assuming the franchise is in a good location and the brand
continues to attract customers you should have a pretty solid business on your
hands. If you want to be a small business owner but you don’t want to risk a lot of
time and capital on a venture that could fail, you might be drawn to franchising.
Pro #4: It’s easier to get advice about a franchise.

If you’re considering becoming a franchisee, you can talk to other people who have
done the same or read about their experiences online. You can get guidance and
learn from the mistakes of others who have opened up branches of the same
franchise. Of course, if you open an independent small business you can get general
advice, but you’ll have access to more tailored tips with a franchise.
Con #1: Franchises can come with high start-up costs.
Starting a franchise might involve higher start-up costs than you would incur if you
started an independent small business. If you’re trying to start a small business
without taking out a hefty loan or putting a lot of your own capital on the line,
becoming a franchisee might not be your best option. Before you commit to one form
of business or the other, it’s worth doing a cost comparison.
Con #2: You have less flexibility with a franchise.
When you become a franchisee you have to abide by the rules of the franchisor and
keep to the terms of your licensing agreement. You can’t shake up things like the
products you carry, the look of your store and the uniforms the staff wear. With a
franchise, you have less scope for innovation and for personalizing your business.
Con #3: Franchise fees can really add up.
Franchisors don’t let you take their logo and run with it. You’ll owe fees to the
business from which you buy the franchise. A portion of each month’s profits will
leave your coffers and go to the franchisor, per your licensing agreement. Those
fees can add up, which is why it’s a good idea to enlist the services of a lawyer to
help you get a good deal on your franchise. If you’re fee-averse, you might decide to
forgo a franchise altogether.
Con #4: The fate of your business isn’t entirely in your control.
Franchisees benefit from the brand recognition of the company whose franchise they
buy. However, this also makes them vulnerable if the public turns against that brand.
Therefore, your franchise is dependent on the current state of the larger company,
as opposed to being able to manage your reputation with your own business. Health
scares at another franchise branch, corporate scandals and more can all leave
franchisees vulnerable and put their profits in jeopardy.