The world is rich with franchises. When a business or brand is thriving and generating returns that warrant it, expansion is the next step. A franchisor’s business is doing so well that he or she allocates a franchisee (or several thousand) to operate a piece of the business, following the established business model, and accessing and utilizing any processes and trademarks. The franchisee steps into this already established (and rising) brand and continues operating, almost like an independent contractor. Here are some pros and cons to consider if you’re entertaining the notion of franchising. 

You’re Stepping Into an Established Entity (Pro)

A huge benefit of operating a franchise is that the business not only exists, but is a well-known and accepted brand. Compare this with the staggering statistic that upwards of 65% of new businesses fail in the first 10 years of operation. There can be lots of reasons for this, like choosing bad business partners or poor marketing techniques. Effectively, part of the draw of owning a franchise is that if you follow the paint-by-number blueprint, you’ll find success.

You’re Not the Primary Decision Maker (Con)

The flip side of moving into somebody else’s vision is that even though you’re not quite an employee, you must follow rules regarding making changes to the business model. If you want to make changes – to the contract or the physical setting of your space – all parties must approve. This is not to say that change doesn’t exist in the world of franchising, but before executing them, you’re going to need the legal thumbs up.

You Have Accessibility Regarding Financing (Pro)

The long and short of it is that a lender wants financial returns, and a franchise brand has proven itself capable of generating them. For that reason, you’re much more likely to qualify for an SBA loan if you stroll into the office with Ray Kroc by your side, figuratively speaking. Further, some franchises actually have their own financing departments, and so they could offer the initial start-up loans themselves, albeit possibly at higher rates. 

You’re Going to Pay a Lot Up Front (Con)

High start-up costs are just the price of doing this kind of business. The initial fee for signing the contract and securing rights to the franchise can typically run anywhere from $20,000 – $50,000 or higher. Another point to consider is that sometimes the franchise agreement steers you to a particular set of vendors, which may or may not have competitive rates.