Do you ever feel like you’re meant to be an entrepreneur, but somehow didn’t get the creativity to go with launching your own business? If that statement resonates with you, buying a franchise business may be the right path for you. Franchising is a way to get into business for yourself, without the headache of creating your own brand, marketing messages, or establishing brand recognition in the marketplace. There are many benefits that buying a franchise can offer you, but it comes with its fair share of risks too.
To help you be more informed about buying a franchise business, we have put together this guide to walk you through the various risks and benefits of buying a franchise. It is important that you understand what buying a franchise is all about before you enter into the process of buying a franchise.
When buying a franchise, there are several financial risks involved. Although buying a franchise comes with buying an established brand and business model from the franchisor, you still have to pay them a sizable amount of money up front to receive your training and assistance in growing your new business.
The biggest risk that you face when buying a franchise is buying a business where the franchisor goes out of business. This is known as buying a “zombie franchise.” When buying a franchise, you are buying into the franchisor’s brand and training. If they go out of business or stop investing significant amounts of money into your location (locations), it can be very difficult for you to keep your company rolling on a profitable path.
Other risks that you face buying a franchise include buying a franchise without buying into a “hot” industry, buying a franchise within an over-saturated market, and buying a franchise from an under-capitalized franchisor. We will go through what each of these factors mean, so that you can understand how they might affect your buying decision.
Buying a franchise in a “hot” industry means that there is lots of opportunity and potential to make money, whereas buying a franchise in an over-saturated market means that there are already plenty of people selling whatever it is you’re buying into.
In buying a franchise within an over-saturated market, you are buying into an industry where there are already many franchisees for whatever it is that you’re buying into.
While these risks do exist in any franchise opportunities, similar risks are present in any business venture, and shouldn’t be a discouragement from buying a franchise business. There are literally thousands of excellent franchise brand opportunities that offer excellent stability and have longterm business strategy for franchisees.
Despite the risks in buying into a franchise business, there are a great number benefits to franchise opportunities that are worth looking into.
The first benefit of buying a franchise is buying into an already established brand that you can rely on for marketing, branding, customer service, and other aspects that are vital to maintaining your business. It is important to remember that buying a franchise business means buying into the franchisor’s system. This means buying into a proven business format that has been perfected by the franchisor over time, along with buying access to the brand equity the franchisor has already created for you.
Another benefit of buying a franchise is buying into something that is scalable and repeatable. In other words, buying a franchise gives you an opportunity to run a profitable business that can be replicated across markets, locations, and time. In buying a franchise, you have buying into a system that has been created by the franchisor for success in buying a new location off of their existing model.
Franchisees benefit greatly from an already established market opportunity; buying niche and buying industry. This means that there is already demand present for what you are buying to sell, and the franchisor likely includes ample support systems and training to maximize those selling opportunities.
If you are interested in finding a franchise business opportunity, contact one of our trusted business brokers to get started.
The information contained on this page is for illustration purposes only and does not take into account your personal situation, financial situation or needs. We assume no responsibility to any person