There are plenty of advantages associated with purchasing a franchise. The basics of economics illustrate that if there a type of business that’s finding success, then people will want a share of that success.

Wondering about a franchise, download our eBook on Franchises here.

Buying into an established business

One of the major benefits of purchasing a franchise business is that it enables you to take advantage of a brand and business that has already established itself. That means the franchise will come with a tested and tried set of operating procedures and policies, as well as an existing audience or customer base. One of the reasons why many new businesses fail within the first few years of opening is because they often struggle to raise awareness about their existence. Buying a franchise allows you to skip over some of the more challenging aspects of launching a new business enabling you to hit the ground running straight away.

Simpler Financing

Establishing a new business is a risky and often an expensive process. Another significant advantage of buying a franchise is that it makes acquiring financing much easier. Lenders are much more likely to provide financing for an entrepreneur who is looking to invest in a business that has already proven itself to be a huge success. The franchise itself will come with an established network, branding, and a strong support structure to help new franchisees succeed. In some cases, franchisors themselves might even be willing to finance the purchase of one of their franchises.

Support and Security

To grow a business to the point where franchising is a feasible option, franchisors need to invest in support and security systems. These systems will supplement the training franchisees receive for managing the business’ accounts, tracking sales, setting targets, and marketing locally. All of these are usually included in the cost of the franchise and ensure the franchisee has access to everything they need to lead a successful franchise.

Access to an in-built network

It’s hard to exaggerate the value of a network of dependable business contacts. Building a network is essential for any entrepreneur who aspires to excel in their chosen field or industry, but it takes a lot of time and hard work. Buying a franchise makes you a part of the franchisor’s network while also enabling you to take advantage of every contact they have acquired. Your franchisor should have lined up suppliers, distributors, marketers, and other essential personnel so new franchisees can get up and running as soon as possible. As they introduce you to more people within their network, you will have the opportunity to foster your own relationships.

Better chances of success

Regardless of how savvy an entrepreneur is, the odds are stacked against those who decide to launch their own business. Most businesses fail within the first few years, although the precise figures are often distorted. While some businesses launch with the eventual intention of franchising, many others make the decision once their business has proven itself viable and successful enough to make the franchise model work for them. The point is that franchises are generally safer investments than conventional businesses and are less likely to fail. You are much more likely to see the money you spend buying a franchise again than if you had spent it building a business from scratch.

An excellent management opportunity

Working your way up through any business to the point where you can apply for a managerial position takes a lot of time and dedication. Landing your first manager job is especially difficult because you can be sure that there will be other applicants competing for the same position. If they have already held managerial positions in the past, they will be much more attractive to prospective to an employer. However, the unique nature of franchises means they are ideally suited for anyone looking to gain experience managing a business or branch. Because franchises come with all the essential components already in place and franchisors provide support to franchisees, franchisees can learn how to manage a business even if they don’t have any previous experience. After gaining some experience running a franchise, a whole new world of opportunities will open.

The Potential Risks Associated with Purchasing A Franchise

There are plenty of risks associated with running a franchise. If you buy a franchise business and it goes badly, you could lose all your money and any assets, such as your house that you have borrowed against.

Franchising is very different to other types of business. You won’t have the same level of control compared to a business you run independently. Franchisors can usually control the products or services you offer, where they must be sourced from even if it you can get them cheaper somewhere else. As the franchise adjusts to meet changes in the market, the franchisor might make changes to the franchise system. A franchisor may be able to make these changes, even if you don’t agree with them. 

Before purchasing a franchise, it is important to make sure you understand the costs of things such as; the upfront fees, establishing and maintaining the franchised business, any significant expenditure you might have to pay and franchisor insolvency.

Just like any business, your franchised business or the franchisor’s business may fail. In most cases franchise agreements often include termination rights in favour of the franchisor. The Franchising Code sets out processes the franchisor must follow if they desire to terminate franchise agreements, it doesn’t stop you from being lawfully terminated. It is important to be aware that you could potentially lose your whole investment if the franchisor terminates your franchise agreement.

Furthermore, you can’t always resell or renew the franchise. This is important to be aware of if it isn’t possible for you to make enough money to recover your costs before your franchise term finishes.

Understanding the world of franchising is a lot more than just seeing the numbers.

Thinking of Buying a Franchise?

Our eBook on Buying a Franchise is available here

We offer a complimentary discussion about your options to buy a franchise, having developed master franchise agreements and understanding the needs of potential franchisees we are here to help. Schedule a meeting with Craig here.