The Pros and Cons of Buying a Franchise

If you’re new to entrepreneurship, buying a franchise can be a great way to break into owning and operating your own business.

Canada’s franchising sector is strong and growing, according to the Canadian Franchise Association. Not only has there been a 23% increase in the number of franchise brands over the past five years, working with a franchisor gives you access to all the ready-made benefits of being your own boss—so long as you’re willing to follow a prescribed business system.

To help determine if becoming a franchisee is the right move for you, here are some of the biggest pros and cons of buying a franchise.

Franchise ownership pros

Because it’s already a going concern, owning a franchise does away with the struggle to develop, launch, and market a brand-new product or service. Instead, you’ll be operating around a proven business model—one with a recognized brand and built-in customer base.

By investing with a franchisor, you’ll also typically benefit from:

  • Training and ongoing assistance (including, in many cases, help choosing an appropriate business location)
  • A leg-up in terms of getting any financing you require (since you’ll have access to an established business plan and market research)
  • Being introduced to vendors who can supply all the goods and equipment you’ll need for starting and running your business

Buying a franchise lets you jump directly into a business ownership role supported by demonstrated work processes and marketing strategies.

Franchise ownership cons

A big stumbling block for many would-be franchise owners is the lack of autonomy that punctuates certain elements of this type of business.

Even after obtaining financing and doing your own hiring, for example, you’ll still be required to follow the operational policies laid out in your franchisor’s disclosure document (FDD).

Other potential downsides include:

  • A commitment to share profits and pay regular royalties to your franchisor
  • The risk that bad press generated by a fellow brand franchisee could negatively impact your own reputation, operations, and revenue
  • The possibility that your franchisor may not wish to renew or extend your agreement once the initial term has expired

If you do decide you’re comfortable with the various regulations, responsibilities, and risks involved in buying a franchise, make sure you seek dedicated legal advice before signing an official agreement.

Franchised businesses may account for one out of every five consumer dollars spent on goods and services in Canada—but doing your due diligence is the best way to ensure the franchise you’re considering is sufficiently profitable and will meet all your other needs as a new business owner.

To franchise or not to franchise

If you’re at all concerned about not having complete operational control as a franchise owner, buying a thriving, independent business could be a better professional fit.

You might have to work a little harder to find lenders or investors willing to provide the working capital and other financing needed to buy and run a non-franchised business. But you can expect many of the same pros, including benefiting from:

  • An established brand, operational model, supply chain, and marketing strategy
  • Verifiable profit margins
  • Training and support from the seller in many cases

You also won’t have to worry about forfeiting decision-making power over the direction your company takes in the future.

For better or worse, your non-franchised business will rely heavily on your own experience, productivity, and insight for its continued growth and success—and you won’t have to share the financial fruits of your labour with anyone else.

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