Advantages and Disadvantages of Franchising in 2021
If you’re in the market to open a new business, an age-old question is whether to go the independent or franchise route. Knowing exactly what you want out of an ownership experience will help you assess which path is right for you.
ADVANTAGES TO FRANCHISING
With a good franchise, you’re working with a proven formula and the backing of a team of industry experts all focused on making your business a success.
BUILT-IN NAME RECOGNITION
Buying into a franchise means, first and foremost, that you’re buying into a brand. Before you even open your doors, you are operating with the clout and established reputation of the brand your store represents. When choosing a franchise to invest in, it’s important to find a brand whose ideals, values, mission, and business model align with your own.
LOWER INVESTMENT
Initial startup costs tend to be lower for franchises than they are for independent operations, and with the backing of a proven brand, financing is often easier to acquire, if need be. Small business loans (SBAs), for instance, have strict eligibility requirements, but they reserve a portion of their loan allotment specifically for franchisees.
All franchises provide a breakdown of startup costs, including initial franchising fee, training, marketing, and more. If the information isn’t directly available on their website, it’s detailed in their Financial Disclosure Agreement.
BACKED BY EXPERIENCE
Opening a new business requires a lot of legwork, but a franchise system handles a lot of it, which is beneficial to new entrepreneurs and experienced business owners alike. Things like market research, product creation and assessment, location selection, and optimizations are all rolled into the initial costs of opening a franchise and managed by members of the franchise team who are well-versed in all areas of store operation.
TRAINING
One of the biggest advantages to investing in a franchise system is the brand-backed training program and support network. Techniques and methodology that have made the brand a success can be replicated and passed on to new franchisees to maintain a sense of continuity between all locations, basically acting as a blueprint for success.
MARKETING
Franchisors have already tested countless marketing techniques before you’ve come on board, and they know what works. Smaller or independent owners typically don’t have the time, money, or level of expertise to enact the kind of comprehensive marketing strategies that franchises implement with ease.
As a franchisee, you are able to capitalize on the experience and expertise of a dedicated marketing team whose sole job is to make the franchise, and therefore YOU, a success. The franchisor will also be marketing the brand on a larger scale allowing you to piggy-back on their efforts as you market your own location.
DISADVANTAGES TO FRANCHISING
Franchising isn’t for everyone, so even some of the elements listed above as advantages may not appeal to all sensibilities. If independent ownership has always been your goal, there are certain downsides to buying into a franchise.
CONTRACTS
All franchisees are required to sign a Franchise Agreement (FA) upon purchase of a franchise. This agreement holds you to the specific rules, systems of operations, and overall way of doing things under the structure of the franchise. FAs are essentially a legal and binding contract between you and the franchisor, and if you stray off course, you could incur various fees or penalties that may jeopardize your business.
ONGOING FEES
Beyond initial opening costs, most franchises require ongoing royalty payments for use of the brand name, operating systems, and marketing and advertising support.
LESS CREATIVE FREEDOM
While you will technically be your own boss, much of the way you run your business will be dictated by the franchisor. Less freedom doesn’t mean no freedom, however. Many franchisors welcome and even thrive on collaboration with franchisees, but any alterations or innovations are subject to the rules and regulations laid out in the FA and any other legally binding contracts.
POPULARITY VS. NOTORIETY
Your association with a franchise name can be either a benefit or a deterrent, depending on the reputation of the franchise at any given time. Your own location may be running without a hitch, but if there is any trouble or controversy with the brand on a national or international level, the blowback could affect your business detrimentally. This is another reason why finding a franchise with ethical and transparent business practices will pay off.
At the end of the day, independent business ownership may allow for more autonomy, but it can be fraught with uncertainty and costly mistakes. A franchise may afford less freedom of concept, but your investment buys you a significant head start and the ongoing resources of an established brand, business model, and successful operating system.
FRANCHISING WITH SCENTHOUND
Of all the franchise systems that have successfully weathered the COVID-19 storm, dog businesses haven’t only survived but thrived. As part of a recession-proof and now a pandemic-proof industry, Scenthound offers a unique business opportunity to franchisees who are interested in reinvigorating the pet care market by revolutionizing the traditional concept of pet grooming.
If you are interested in joining the Scenthound Pack, please click here to get started.