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Investing in a Franchise: Here’s the Lowdown on the Pros and Cons

By March 2, 2019 No Comments
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A franchise can be a good option for anyone who has entrepreneurial skills and does not want to start a business completely from scratch. Buying a franchise means you get the benefit of being part of a major brand and everything that comes with that. However, as with any new business venture, there are cons as well pros to investing in a franchise.

This is why, before you leap at making a decision such as buying a Cold Stone Franchise, you need to think through your options carefully. Use the following list of pros and cons to help you decide whether investing in a franchise really is right for you.

Investing in a Franchise: The Pros

There are several pros that come with investing in a franchise.

An Operating System That Is Already Successful

The brand you are buying into already works. Therefore, usually you do not have to spend time developing your own processes and procedures.

Help with Marketing and Advertising

When you buy a franchise, you will normally be expected to invest some money in marketing and advertising. However, you get help ensuring that the brand message is consistent and that your marketing efforts are successful. This is important because effective marketing and advertising are essential to the success of any business.

Support When You Need It

One of the most valuable benefits of buying a franchise is that you get access to advice and support from a network of other franchise owners. This is different from setting up your own business from scratch. In that case, you might find that available support is scarce.

More Bargaining Power with Suppliers

The collective bargaining power of a large group of franchises is far greater than that of a single business owner. This means that the cost of purchasing inventory is likely to be lower.

RELATED ARTICLE: 5 BASIC ELEMENTS OF A SUCCESSFUL FRANCHISE MARKETING PLAN

Investing in a Franchise: The Cons

However, it’s not all about advantages when it comes to investing in a franchise. There are some major disadvantages, too.

The Cost of Buying the Franchise

For one thing, franchise purchase costs tend to be high. For example, the average cost ranges from $20,000 to $50,000.

That is a significant upfront investment. This is especially the case considering that you need money to meet other expenses as well. For instance, you’ll likely have legal fees, inventory costs, and a need for initial working capital.

It’s also worth noting that what these initial fees cover varies from brand to brand. Sometimes, they only cover the cost of the license. On other occasions, they cover the cost of other aspects, too, such as training and support.

Fees for Ongoing Support

It’s not just the initial upfront fee that you have to pay. You’ll also need to use part of your revenue to pay for help the brand provides, such as marketing and sales support. This is obviously a major disadvantage, as the revenue you work so hard to create is not all your own to invest as you wish.

Less Freedom in the Way the Business Can Operate

If you set up your own small business, you can run  it as you see fit. However, this does not apply if you buy a franchise. You have to comply with the operating procedures and processes of the brand.

Is Investing in a Franchise Right for You?

If you want to start out in business on your own, while also having the benefit of support and a head start in brand awareness, investing in a franchise might be a good option for you. However, it’s important to remember that costs are high and your revenue will never belong entirely to you.

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