franchise law

What Are the Benefits and Disadvantages of Owning a Franchise?

Have you considered owning a franchise? Many entrepreneurs do as it can be a great opportunity to buy into an existing business that already has a solid foundation and structure in place. It is important to know, however, that success in owning and operating a franchise is by no means guaranteed and there can be benefits as well as disadvantages to owning a franchise. Let us look at both sides of that equation here.

What Are the Benefits and Disadvantages of Owning a Franchise?

When you consider owning a franchise, you may get excited by the fact that the franchise you are looking to buy already has an established track record. It can be a way to go into a business with a solid support system, as well as have potential benefits like training programs and an organized supply chain. There are, in fact, many benefits of owning a franchise. Historically, franchises have fairly high success rates and tend to flourish where other independent start-ups struggle.

Much of the success of franchises has to do with the inherent benefits of buying a franchise. For instance, in many if not most franchises, owners are given assistance throughout the business journey. Oftentimes, a franchise is built from the ground up upon purchase, a turnkey operation. Franchises often offer a package deal including all the necessary equipment and supplies you need as well as detailed, step-by-step instructions as to how to get the business started. In addition to this initial support, many franchises provide owners and staff with regular, ongoing training opportunities.

As you take the steps to open up your franchise, you also have the inherent value in buying into an already known and established company. So many businesses struggle to get the word out and market the business, but franchises often do not have this problem. Many are national brands with big name recognition. Buying into a bigger business also means you can reap the benefits that come with the power of a big company, such as collective buying power. The parent company often has access to discounted inventory and supply which means costs for franchises in the chain are much lower than those incurred by other business operations.

All of these benefits can make franchise ownership very appealing, but you would be remiss if you did not consider the potential disadvantages of franchise ownership. Some entrepreneurs may find franchise ownership stifling. While you may own the franchise, there are often very specific rules and guidelines you must follow in pretty much every aspect of running your business. Always check the franchise agreement to see what things the franchisor can control. This can include everything from business location and hours of operation to the conditions should you choose to resell the franchise.

There are also significant upfront and ongoing costs that can be a major downside to buying into a franchise. It often takes a significant up-front investment to buy into a franchise. In addition to this, you will usually need to pay the franchisor a percentage of royalties each month. In certain cases, there may be other fees charged by the franchisor for things like the cost of advertising.

Pittsburgh Business Law Attorney

If you are considering buying a franchise, talk to the dedicated business law team at Jones, Gregg, Creehan & Gerace. We can walk you through the franchise agreement and make sure it is a good fit for you. We want to help you succeed in business!  Contact us today.