With the rise of remote work and the desire for flexible business models, many entrepreneurs are considering buying a franchise when seeking to own their own business.

The franchise model is becoming increasingly dynamic and interesting. Opportunities across various sectors cater to evolving consumer demands and leverage new technological advancements that pop up on what feels like a daily basis.

Too often, however, those seeking opportunities to own their own business assume that a franchise is much less likely to fail simply because that franchise is based on a proven business model. While it’s definitely possible to become a successful franchise owner, guaranteed success is certainly not a given.

That’s why the franchise experts at PBMares put together this guide — to help examine and weigh the pros and cons of buying a franchise.

The Pros Of Buying A Franchise

Buying a franchise means you’re purchasing the rights to operate a business under an established brand. You benefit from a proven business model, brand recognition, buying power, and support from the franchisor.

Proven Business Model

One of the most challenging pieces of owning your own business is the startup stage. Because the franchise is already established, there is no need to conduct market research, create a business plan, test products, etc. You essentially skip the headaches of being a startup.

Going the franchise route means leveraging a tested business model with established operational procedures and avoiding the costs and risks associated with trial and error.

Immediate Brand Recognition

Established franchises have done all the work to build a brand in the marketplace, which significantly reduces the massive amount of time and effort new businesses spend trying to attract and build brand awareness, recognition, and loyalty with customers.

More Credibility for Financing

An established brand goes a long way, not only with customers but helps franchise owners secure financing more easily. The established track record of the franchise lowers the risk in the eyes of the lender and makes them more willing to extend financing.

Buying into any franchise — or starting up your own business — is expensive and most new business owners find themselves in need of SBA financing at some point. SBA loan requirements are extremely strict, so the established brand name comes in very handy. Plus, the SBA reserves a portion of its funding specifically for franchises.

Support from the Franchisor

Franchisors provide easily replicable systems, comprehensive training programs, and ongoing support in areas like marketing, operations, and management.

This support means you’ll automatically receive help in the following areas:

  • New hire training (e.g., opening and closing procedures, daily operations, how to use software, etc.)
  • Human resources
  • Marketing
  • Buying power (i.e., if the franchisor buys inventory and/or equipment in bulk, the franchisees enjoy lower costs on these essential supplies)
  • Finding a location that’s most likely to be profitable
  • Standardized manuals that make it easier to build a strong culture and communicate standards to employees

Cons of Buying a Franchise

Of course, buying a franchise also comes with downsides.

The Expenses

Between the franchise fees, royalties, marketing expenses, and operational costs, buying into a franchise is expensive.

Be sure to consider all the expenses in light of your personal financial situation:

  • Does financing make sense?
  • How might financing impact future profits?

These are questions that can be answered by working closely with franchise accounting experts to develop realistic budget projections and assess financial readiness.

Ongoing Royalty Payments

In addition to the costs to purchase the franchise, you’ll continue to share profits with the franchisor.

Royalty payments are ongoing in exchange for using the franchise name and system. You may also have to share in some of the marketing and advertising costs at the discretion of the franchisor.

Restricted Flexibility

For entrepreneurs, this one can be especially hard to swallow. Because franchises must often abide by strict operational guidelines to maintain consistency, the freedom to innovate is restricted.

Learn More

When deciding between buying a franchise or starting an independent business, consider your long-term vision for your business. If you value autonomy and creativity, starting an independent business offers more freedom. If you prefer a structured environment with ongoing support, franchising may be a better fit.

By carefully evaluating your goals, risk tolerance, financial situation, and market opportunities, you can make an informed choice that increases your chances of success.

With many years of experience serving franchises in various industries, our dedicated franchise team can help you weigh the pros and cons of purchasing a franchise. Contact us today.