The Pros and Cons of buying a Franchise 

The Pros and Cons of buying a Franchise 

Buying a franchise is an ideal way to start a business for many people. There are many different types of franchises and the model is turnkey so that everything has been documented and created for you. Much of the hard work of creating a business is done and you are buying into an established business and brand. 

It is important to make sure that when buying a franchise you understand that you are only have rights over that business for a period of time and you never have full ownership of the business. You should carefully consider what would suit you best before you commit to a franchise business. 

A franchisor will teach you how to run the business and everything you need to know about the processes. However, you will need to do your own self education outside of the franchise structure to be successful in business. Running a franchise differs from owning your own business, but a lot of the core fundamentals of business are the same and to be successful you will need to master many of the skills required to run a success business. 

Don’t be fooled into thinking it will be a success for you because someone else could do it. You will need skills to sell and promote the business, it can be easier selling a recognisable brand. 

 

PROs 

Support Network & Mentoring 

There has been a great focus on the mental demands that running a business takes on small business owners and their well-being. Having support from not only the master franchisor and other franchisees can benefit you with a network of knowledge and comradery that many business owners do not have. Having mentors and those who are experienced in your business and understand the demands can help you run the business successfully and resolve problems faster.  

 

Mistakes you don’t need to make 

It can take quite some time to establish all the necessary components that make a successful and profitable business. Usually this is done by trial and error and this process can involve making expensive mistakes. Buying into a franchise where the franchisor has discovered and refined a winning formula saves you from having to muddle through this process. You walk into a business that is established and has solved all the problems and refined the process. 

 

Branding 

It is easier to get customers buying if they know who you are and what you do. It takes quite a lot of money and time to establish a brand name and reputation in the marketplaceIn established franchises the franchisor will have already of done much of the hard work here and you are usually opening a business and not having to educate customers to what you do or what to expect. Typically, the franchise is national and this adds more depth to your brand power. 

 

Cons 

Structured and not tailored 

The nature of a franchise is extremely structured and the business is completely systemised and there is little room for individuality. If you are not a person who likes to follow a system and likes to do your own thing you may find that a franchise model does not suit you. You should definitely consider your temperament and your ability to colour in between the lines before you commit to a franchise system. 

 

You don’t own the Franchise 

Ultimately you are buying a name and ability to operate the business for a period of time and you are not the ultimate owner of the business. Usually franchise agreements are for a fixed amount of time. It may be that you sell those rights or that your term comes to an end and is not renewed. You should consider the cost benefit of what the cost of the franchise is and whether you will better off establishing your own business and what the value of that business would be. Franchisees do invest a great deal of time and effort into developing their business and sometimes not the ultimate beneficiaries of that good will. You should ensure that you check and consider what the terms are. 

 

Others can affect your business 

Just as others in the franchise can positively affect your business in a franchise they can also negatively affect your business. Recent underpayment issues and the royal commission has uncovered many issues and bad practices in the Franchise industry. Understanding what type of franchisor and franchise system you are dealing with and the reputation in the marketplace will help you make the most informed decision. It is important to talk to other franchisees before committing and making sure you are joining a business that is thriving and going ahead. This will mean talking to a lot of different franchisees and market research to make check that the Franchisor lives up to the marketing hype. This is a longterm relationship and the integrity, or lack of it, of the franchisor or other franchisees will affect your business and enjoyment of running your business. 

 

Buying a franchise is a major investment decision and ensuring you do your due diligence will make sure that you make the best decision you can at the time. You need to know that you will be able to make the franchise work and be able to work in the franchise system. Getting advice from professionals is crucial in understanding the commitment of a franchise and what the agreement entails. Starting off on the right foot will give you best chance of success. 

 Getting the expert franchise advice from an experienced franchise lawyer will help you through the stages of buying a franchise.  

Speak to one of our business lawyers today about buying a franchise on 1300 907 335 or complete an online enquiry form and we will respond to you promptly. 

 

Please note: The above is not intended to be legal advice. Every circumstance is different. Always seek legal advice in relation to your individual situation.
© PCL Lawyers 2020

 

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