Many new investors wonder whether its a good idea to buy a franchise for a business or simply create a business on their own and not pay all the franchise fees.
There is no simple answer to this one but there are a few important facts that can help you make a better decision. The initial costs of a Franchise can tend to be very expensive and require a lot of money to invest in. Other than their initial fee for setup, you need to take as well into account the costs of operating and using the franchise name and services, that they call Royalty fees. This usually is in a form of monthly percentage of sales.
One pro to owning a franchise is that it may reduce the risks associated to starting a new business and uncertainties of the location and product. Starting a new business requires a lot of dedication, time, market research, advertising and brand recognition which is not the case for a franchise.
Franchises also help employers train them and their staff and usually perform market research on the location to determine the potential in a specific area. They offer support and a working system in place so you dont need to think outside the box.
Opening a new store can pose a large risk and if you have the money, it is usually a good idea to just buy a franchise as your risks will be reduced dramatically. Be careful though to be a well known brand and a reputable company. Maybe businesses nowadays have a franchise option and it can be hard to determine if the specific franchise is a good opportunity and name to go with. Always do your due diligence and investigate the franchise. Talk to other business owners of that franchise and find out about their experiences.
Many people have experienced great results with franchises and yet some haven not. Make sure to find out all the associated costs including contractual obligations and what you are and are not allowed to do on your own. For example, are you allowed to add to the menu ? Are you allowed to purchase cheaper products from another supplier? and Are you obliged to pay for the marketing fees etc.
In summary, Franchises are a good idea if you have the money for it and willing to follow the system without changing much about it. Basically a packaged box deal. If you are tight with money and you need to create something of your own, then franchises are not for you.
Remember in all cases, make sure to investigate the location and your competition thoroughly and even perform market research even if that will cost some money and time, better waste it now and not pour all your money into a business that might fail!
The success of your business is dependent on how much effort you put in the beginning researching it!