3 Reasons Why You Shouldn’t Start a Franchise

3 Reasons Why You Shouldn't Start a Franchise

We all know that starting a business isn’t a one-size-fits-all sort of thing. What works for one person will not for someone else, and that’s a good thing. If there were only one solution, then everyone’s business would look the same.

We embrace that variable experience at Entrepreneur. It’s why, in addition to general guides on starting a business, we offer insight from experts in their respective fields, along with inspirational advice. We know you’re going to need a lot of resources to make your business successful.

So, while we take a lot of pride in putting together our Franchise 500 list, we also recognize that it isn’t the right path for everyone.

1. The cost to start a franchise

Not everyone has seven figures to spend on our No. 1 franchise, McDonald’s, which costs anywhere between $1,008,000 and $2,214,080 as an initial investment. But, for many of us, even paying the $2,095 for our cheapest Franchise 500 entry, Cruise Planners (No. 60) can seem overwhelming.

Most franchises offer help with financing (especially if you are a veteran of the military), but they also tend to have a minimum net-worth requirement. You can get estimates of both of these numbers on each Franchise 500 franchise page, but you can get a better sense of what you’ll need by directly contacting the franchise you are interested in.

Even if you have the liquid assets to get a franchise up and running, it doesn’t mean you are good to go. You also need to think about royalty fees and, depending on the franchise, employee salaries and maintenance costs. You can see that starting a franchise isn’t just something you do on a whim; it takes consideration, certainty and financial security.

What you can do instead: If you’re low on funds, you might consider starting out as a solopreneur, using your time as a substitute for money. This is actually an important step for many business leaders, because it forces them to learn about every role within your business.

When you’re finally ready to hire employees, you’ll know what traits and skills are most valuable and make better hiring decisions as a result.

2. The lack of independence as a franchisee

Running a franchise definitely comes with some independence. You will need to make plenty of important decisions, which can shape the culture and success of your business.

But the same things that are great about a franchise — the amount of support, experience and branding you receive for investing — also limit your options to a certain degree. If you run a McDonald’s franchise, it’s not like you are going to change the logo or decide on company colors or slogans: You’re going to sell Coca-Cola products and Big Macs.

These brands have become successful because people know what to expect from them. You can’t buy a longstanding franchise unit and expect to revolutionize everything. If you have the desire to make something totally new, then, franchising might not be for you.

What you can do instead: If you can see a problem within an industry and know how to fix it, see if you can monetize it. Many entrepreneurs work with what they know: solving problems they’ve come across in their daily lives. Maybe one day McDonald’s will end up paying to use your solution.

Related: The 10 Best Franchises to Open in 2018

3. The passion you need to run a franchise

One of the most common attributes among successful entrepreneurs is focus. When they have a big idea or dream, they don’t let themselves get distracted with things that will not help them move forward. They perfect that idea and everything around it — from the product to the sales pitch and branding.

Starting a franchise can be a valuable investment, but it is an investment. It takes time, it takes money, it takes energy. Unless you already have experience running a franchise, you might not have time to focus on anything else. And that’s okay. But don’t simply assume you’ll still be able to pursue your dream project in your spare time. You might not have any spare time, and even if you do, you’ll be distracted.

What you can do instead: Try partnering with local businesses, who can sell or promote your product or service. That way, you can still enjoy the sort of branding and support you wanted from a franchise while building your big idea. It’s the best of both worlds.

Related: The 13 Fastest Growing Franchise Opportunities From Our Franchise 500 List

While these are a just a few things to consider before you start a franchise, there are also plenty of reasons why joining a franchise is a great opportunity, including working with an established brand and the support you receive.

Whatever the case, you’re going to need hard work to see success, so make sure you pick a path you believe in and go at it with everything you have.

By: Matthew McCreary

For your interest you can view the  step-by-step guide about starting a business here: https://www.finimpact.com/starting-a-business/

Source: https://www.entrepreneur.com


Why do people invest in franchises, and does it even make sense? We’ll cover that topic today on Franchise city. 1. The first benefit is Economies of scale and buying power. If you are investing in a franchise with some type of consumables, supplies, or inventory and this could be hamburgers, cleaning solvent, vehicles or advertising, because you are part of a larger buying conglomerate you will get very low pricing buying in huge volumes for dozens or hundreds of franchisees. Beyond your daily consumables, there are also often arrangements with insurance providers, leasing agents and other industry connections that the franchise has negotiated using this buying power that could ultimately save you a substantial amount of money over being an independednt. Some people make the blanket statement that paying royalties is just not worth it, and we see that often in comments, and in some cases they are correct. But in a solid franchise when you analyze and compare the royalties you pay vs the savings in consumables — you should see an equitable relationship. 2 Success Road map. With every franchise you receive an operations manual. In that manual, are the exact systems, processes & procedures involved in building that business. Many of these manuals are hundreds of pages long and will cover topics ranging from how to acquire customers to how to answer the phone. Now if any of you have ever started a business, you will appreciate how much is involved in getting set up: from creating your branding, to the business workflow, marketing, social media, human resources and employee recruitment training and retention, Client acquisition and retention, a CRM system, billing, accounting and receivables, real estate, sourcing vendors, advertising, where do you advertise your your grand opening. The list never, ever ends for a small independent business owner. And keep in mind, these are all things that are outside your core competency of knowing how to cook the burger or swing the mop or paintbrush. So having this manual that has been refined over many years and franchisees will save hours, days weeks and months of headaches trying to get your own independent business running. And not that it is impossible, people do it, but it is far from easy. Now a large part of that success roadmap are the systems and processes so let’s look at that. With exceptional franchises we will occasionally see independent companies actually signing up to become a franchise. So these are people already in the industry who own an independent shop and they buy into the franchise. This is a huge indicator to us; the franchise is good because this is a person who already knows the industry well, and yet they, as professionals see enough value to start paying royalties. And we often see this with gyms, converting from a private gym to a franchise, garages, painting companies, and others. There are franchises like property management that because of their software and capabilities, owners can more than quadruple the number of clients they had been managing on their own. And with gyms, garages and restaurants, don’t underestimate how difficult it is to have everything in place from the right branding to the right equipment or food, or appropriate pricing, advertising and promotions – as we mentioned previously there is so much to do and any of those things you don’t get right can take weeks to figure out. And the number one reason businesses fail is they run out of money because they didn’t figure everything out in time. Franchising gives you the manual and the ongoing support. Another major advantage is the marketing and advertising. Most franchises will have you pay into a co-op ad fee, usually one for regional and one for national. That money is pooled from all franchisees and obviously great prices are negotiated for these national ads. Your franchise , again if it is a good one, has retained a top marketing firm that knows exactly how to attract customers and the best ways to drive people to your location. With service based brands you will likely have a company that generates local leads for you through trade sites, Google ads or review sites. http://www.franchise.city – search hundreds of franchises #franchisecity #franchising

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