September 17, 2019

8 Pros and Cons of Owning a Franchise Business

If you have a passion to start a business, you may find yourself wrestling with one core question: Should you start on your own, from scratch, or should you purchase a franchise business? Franchises are a good option for some people, but not for others. The following checklist covers eight pros and cons of franchise ownership to help you determine if it's the right choice for you.

PROS

 

1. Proven business model

Franchises exist for one simple reason: the parent company (the franchisor) developed a business model that can be replicated. And while the franchise model is but one rung on the ladder to building a thriving business, having a proven operational framework certainly saves you the trial-and-error involved in figuring things out on your own. In fact, the business model may be one of the most important pieces in getting started quickly as a new business owner.

2. Training specific to your business

Most franchisors offer good training programs to their franchisees. This is helpful for prospective owners who don't have a business degree or who have little prior experience operating a business. Even better, the training you receive is specific to the franchise concept. You won't waste time learning processes and theories that have little relevance to your specific industry.

 

3. Business and technical support

One of the biggest bugaboos for an independent entrepreneur may be the issue of tech support. Who do you call when all the computers go down at once and your business grinds to a halt? Many franchisors offer tech support to their franchise owners—a feature that can be worth its weight in gold. In the case of Home Instead®, franchise owners can access 24/7 tech support to troubleshoot anything from the computers to the phone system. And franchise support often goes beyond technology, too: Excellent franchisors offer advice and help with financial benchmarking, on-site coaching and more.

 

4. Marketing

Marketing in today's media-driven world can be a tricky and expensive proposition. Good franchisors offer comprehensive marketing and advertising materials, from ready-made print advertisements to billboard images to email newsletters you can customize and send to your client list. The cost of developing your own professional marketing and advertising campaigns can be very high, but for franchise owners much of it is included in the package.

CONS

 

1. Franchise fee and royalties

To purchase a franchise business, you must pay a one-time franchise fee, plus ongoing royalties. These fees can range into six figures for certain types of businesses, like restaurants. At Home Instead, we publish this information right on the website, so you can see up-front the costs involved, including our relatively modest franchise fee. Some people see these expenses as a "con," but if you begin pricing out the cost of obtaining individual items like 24/7 tech support, a comprehensive suite of marketing materials and so on, you might find the franchise fee to be a bargain.

2. Rules and standards

There's a reason a Starbucks mocha latte tastes exactly the same in San Francisco as it does in Schenectady: It's because franchise owners must adhere to a set of operating rules and standards developed by the franchisor. This can be viewed as a negative for entrepreneurs who prefer to create their own businesses from scratch. However, for people without a business background or those who see benefit in an established brand reputation associated with a high level of quality, having a standardized set of rules and procedures to follow can be a definite plus. Once you enter the franchise system, you will see the benefit of operating standards, as one of their purposes is to protect the business and the asset you have invested in.

3. Protected territories

When you purchase a franchise business, you often obtain the exclusive claim to specific geographic territory. This means you will never have to compete with another licensed franchisee of the same network during your tenure as a franchise owner. However, protected territories also mean you cannot just decide to open up additional franchise offices in the surrounding area. In order to expand, you generally need to purchase another territory.

4. Inability to independently sell or bequeath the business

As a franchise owner, you generally cannot sell your franchise to just anyone. Nor can you necessarily leave the business to your children in your will. The franchisor usually must approve the sale or transfer of your business to someone else. In the case of Home Instead, a buyer or transferee must go through the same process as any other prospective franchise owner. This step helps maintain the strength and quality of the network, and most franchisors have systems in place for dealing with these scenarios fairly and efficiently.

Franchise ownership can be a great option for many people, but it certainly pays to look at the pros and cons involved in operating this type of business. At Home Instead, we have found that the franchise model can be a good fit for people with a passion for serving seniors who see the value in associating with a global brand that provides a proven business model and world-class support. If that sounds like you, contact us to begin exploring your franchise ownership options in the senior care industry.