Top Franchises - Why Should I NOT Buy a Franchise?

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• published: 26 Apr 2014
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Are there downsides to buying and owning a franchise? Hi, my name is Jeff Spoor of Precision Consulting Group, and I'm going to answer that question in this video. So Why Should Someone NOT Buy a Franchise? I want to talk about the disadvantages of buying a franchise, but first I want to review the advantages, those things that make buying and owning a franchise attractive. You need to carefully evaluate both before making a decision to buy a franchise. So here are some of the advantages of buying a franchise: • Owning a franchise allows you to go into business for yourself but not by yourself. o You will have the training and support of the franchise headquarters, PLUS a network of other franchisees who have done what you want to do. • A franchise provides an established product or service which already has an established brand recognition. o This is a HUGE advantage over starting a business from scratch. • A franchise provides a proven successful business model. o There's no need to re-invent the wheel; just follow a formula that's already working. • A franchise can offer the consumer an assurance of a certain level of quality and consistency. o This is what I like about Starbucks. Now Starbucks is not a franchise, unfortunately, but what I like about it is a certain degree of quality and consistency no matter which store I go into. • A franchise can offer valuable start-up support including site selection, construction and design, owner and staff training, logo and marketing materials, and a proven grand-opening program. o That -- all of that -- is HUGE for kicking off your location. • A franchise can offer ongoing support including general business mentoring, national and regional advertising, bulk buying power, and market research and development. Now, while all of this might motivate you to sign on the dotted line right now, you have to come face-to-face with what are the perceived disadvantages of buying and owning a franchise. So what ARE the Disadvantages? • A franchisee is not completely independent and must adhere to a franchisor's guidelines when operating their business. o So let's talk about that. Why do franchises expect that? • It's a proven formula; why fix what's not broken? • The franchisor is successful when you are successful, so they want you to follow the proven successful formula. Everybody wins in that case! • Franchisees must pay an upfront franchise fee and ongoing royalties. o This is true. o But you need to know that the franchisor doesn't make money from the franchise fee; this is basically their cost to get you up and running, in the same way an employer spends money to get a new employee trained and up to speed. o But then there's the issue of the royalties. This is how franchisors grow their franchise brand. Keep in mind that the franchisor is for all intents and purposes giving you a "business in a box," and they're charging a small percentage of your receipts to provide it. You can't fault them for that! o I'll spend more time in another video addressing the franchise fee and royalties. • Franchisees may be required to use only certain vendors. o True, but it's only to provide you with a better price for cost of goods. o Plus, it helps maintain the quality and consistency we talked about earlier. • A damaged franchise system or brand could potentially have a negative effect on an individual franchises performance. o That's true. o But that's where a franchise consultant can help you find the best fit for you. o We have the largest portfolio of franchises out there, and we are careful about which franchises we work with. o We will assist you with the due diligence process. If you want to: - Be your own boss - Set your own hours - Devote time to things that really matter to you, Simply click this button right here to get started.