We have tackled the subject of becoming a franchisor often. What does it take to become a franchisor, is your business right to franchise, are you the right person to be a franchisor; all of these have been addressed. But we don’t often talk here about joining a franchise as a franchisee.

Joining a franchise helps reduce riskJoining a franchise

We don’t talk nearly as much about the pros and cons of joining a franchise. However, the answer to a franchisee are similar. Like any business model or business decision, there are pros and cons. I am going to assume that you have already decided that you have what it takes to be a business owner in general, and now you are just considering if you want to go it alone or be a join a franchise. I’m a positive guy, so lets start with the pros!

The pros

Faster start-up

In a franchise system, the franchisor steps in to help you expedite the start-up phase by providing you with a plan of action. They help you crucial decisions such as site location, hiring new staff members and the initial marketing and advertising of the business.

Brand Recognition

One of the benefits of joining a franchise is the brand awareness and national advertising power, either present or future. In addition to managing national advertising campaigns, most franchisors help you develop an effective marketing plan and often provide advertising assets as well.

Risk Mitigation

Joining a franchise is largely about risk mitigation. Everything in business is risky. Small and large companies fail all the time, franchisees included. However, a franchise is, at least to some extent, a proven business model. Naturally the more successful franchised locations in various locations a franchisor has, the more their model can be considered “proven”.

Economies of scale

In many franchise systems, you will have reduced buying costs through collective buying power for goods and services.

Others

There are other “pros” on the franchise side, some ubiquitous and some industry or brand specific, such as ongoing training, a team keeping an eye on the changing business landscape, a pricing structure, access to marketing, real estate, graphic design, and other professionals at no cost, and collaboration between franchisees to share best practices, just to name a few.

Of course there are two sides to every coin.

The cons

Co-Branding

A franchisee, by definition, is using the franchisors name and marks. Obviously, that is one of the attractions of a franchise. However, if something happens to tarnish that name, your business may be directly affected. If a franchise restaurant serves food that gives people e-coli, and you share a name with them, you will likely see a drop in sales. If a franchisee in your system nearby gives mediocre service, you will likely be lumped in with consumer opinion of the brand.

Sharing the spoils

Franchisors are going to take a piece of your revenue, period. That is the model. The question isn’t if, but how much and how sustainable that is. Of course your first thought is likely royalties, but franchisors may charge other fees that may or may not be directly tied to how much revenue you are generating. Advertising fees, training fees, retraining fees, renewal fees, transfer fees, technology fees; that is just a sample of the fees you may see in a franchise agreement.

Franchisors are systematic

In fact, that is one of the attractions; there is a proven system to follow that works and generates profits. However, this also means that you generally have to stay within the bounds of the system (there are some exceptions, read my answer on Quora about being part of the brand of a franchisor here to learn about how a franchisee invented the Filet O’ Fish). You may have ideas that you want to try in different inventory, marketing, or changes to the services you provide customers, but the franchisor generally has the final say in if you are allowed to try those ideas.

Others

Just like with the pros, there are other cons, some that are brand specific and some you will see everywhere. Lack of responsiveness to systemic issues, overly-intrusive monitoring, and having to get approval to sell your business are a few.

Remember this, though:

  • A new franchise opens every 8 minutes
  • There are about 21 million people employed in the industry
  • Franchised businesses contribute over $2 trillion dollars of economic activity in this country every year (source).

Franchising isn’t for everyone, but joining a franchise can be a rewarding experience for someone that is ready to join the ranks of entrepreneurs but doesn’t want to consistently be reinventing, and doesn’t mind being creative within a framework.