3 Pros (and 3 Cons) of Franchising

Those who have been newly bitten by the entrepreneurial bug often turn to franchises for their first foray into the business world. For many reasons, franchises present themselves as an attractive option for those seeking to “become their own boss.” Just like with any other business venture, though, there are pros and cons to be weighed before signing a franchise agreement. Trembly Law Firm has identified three pros and cons to becoming a franchisee to set accurate expectations for potential franchisees. 

Pros

  1. Franchisees enjoy an already established brand, complete with a tried-and-true business plan and crucial infrastructural support from the franchisor. Having your prospective customers already familiar with your business and what they can expect from you is a huge advantage starting out as a franchisee. 
  2. Getting a loan to start your business is easier when you are starting a franchise. If you have doubts about your ability to get a substantial small business loan from an outside lender, you might have more success getting an in-house loan from your franchisor. 
  3. You have easy access to a wealth of knowledge – your franchisor and other franchisees. No matter what you have a question about when starting your individual franchise, chances are someone you can easily email or call up has tackled that exact issue before. 

Cons

  1. Franchisees have significantly less freedom and flexibility relative to other entrepreneurs. This is arguably the most obvious challenge for many franchisees, as nearly every aspect of their operation is tightly controlled by procedures mandated by the master franchisor. Additionally, you could sign a franchise agreement that locks you into a longer-term deal than you might end up preferring. 
  2. There’s less opportunity for you to control your own narrative. If another location of your franchise, for example, causes an E. Coli outbreak, then sales at your store might suffer through no fault of your own. 
  3. Startup costs, royalty fees, licensing fees, and other financial barriers to entry can add up. The costs of becoming a franchisee of a reputable and successful franchise can be quite high. Once you get your location up and profitable, you must dedicate a portion of your profits to fees payable to the master franchisor. 

Conclusion

Becoming a franchisee requires the same level of due diligence and forethought required of entrepreneurs starting their own company. A key part of achieving success as a franchisee is negotiating an effective licensing agreement. If you need legal assistance with any aspect of your franchise, reach out to Trembly Law Firm today. We can be reached by phone at 305-431-5678 or through our website.

Trembly Law

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