Franchising 101: Understanding the Pros and Cons of Franchising

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pros cons franchising

Franchising is on the up in the UK. As of 2018, there are 10 percent more franchise units than there were in 2015 and 14 percent more people employed in the industry. This amounts to 710,000 employees working in 48,600 franchise units across the country. The franchise sector is clearly thriving, but is running a franchise all it seems?

In this article, we’ll take a look at the pros and cons of franchising. If you’re to become a successful entrepreneur, you’ll need to understand the advantages of the model and be aware of the challenges you might encounter.

Advantages of franchising

1. You can join new sectors

If you start an independent business from scratch, you’ll need to have a significant amount of knowledge and industry experience. One of the biggest advantages of the franchise model is that you can start businesses in sectors that are completely new to you because your franchisor will offer comprehensive training. You’ll even get ongoing support to guide you through any issues that crop up once your business is in operation.

As long as you have a passion for the industry, commitment to the brand and the determination to drive profitability, you should be able to develop a highly successful business.

2. Proven business model

When you join a franchise, the business strategies you use will have been tried and tested extensively. The franchisor will have already weathered any rough patches and resolved any problems. This means you’ll be able to take on a business model that has been proven to work time and time again.

3. Brand awareness

If you invest in a franchise with significant brand recognition, you’ll probably benefit from an existing customer base. Consumers will already be aware of your brand and have an opinion of it – hopefully a positive one. So, you should be able to make a good number of sales from day one, as you won’t have to spend time persuading people to use your products or services.

4. Training and support

Unlike independent business owners, franchisees get the chance to enrol onto a comprehensive training scheme and access expert guidance throughout their franchising career. Running your own business isn’t always easy, so this expertise can be invaluable, especially in the initial stages.

Being able to rely on the support of a more experienced businessperson is also reassuring. It can enable you to launch your own successful franchise with confidence, knowing you can turn to your franchisor if the going gets tough.

5. Networking opportunities

For many franchisees, one of the best things about investing in a franchise is the family of franchisees you join. If your chosen brand already has a significant network of franchisees, you’ll be able to learn from like-minded businesspeople.

Most franchisors organise regular company events, and there are a number of annual franchising expos and conferences, so you should get plenty of opportunities to mingle with your fellow franchisees.

These events are fantastic if you want to hone your networking skills and share franchising tips and tricks. Other franchisees may even be able to offer you reassurance if they’ve experienced the same obstacles you have.

Challenges of franchising

Running a franchise can be hugely rewarding and profitable, but there are some challenges that come along with the business model.

1. Lack of control

Because you’re using proven business strategies, you’ll need to stick to the franchisor’s rules. When you sign the franchise agreement, you’re giving up creative freedom in return for financial security. As a result, there isn’t much room to come up with radical new ways of doing things; although you can approach the franchisor with fresh ideas, you’ll be expected to follow the rulebook most of the time.

This may mean you’re tied to specific suppliers too, and you’ll probably be obliged to regularly report back to your franchisor to update them on your performance.

2. Extra fees

If you’re investing in a franchise, you’re paying to use a successful business model. As well as the expected set-up costs, you’ll need to budget for the franchise fee, which covers elements like training and support, as well as ongoing royalties and marketing fund contributions.

Although you’re running your business, a share of your profits will go back to your franchisor. However, the security your business model brings should more than cover these costs, so, in theory, you should never be out of pocket.

3. Risk to reputation and profits

Finally, the negative performances of other franchise units can have a detrimental effect on your business, lowering its profits and damaging its reputation. For instance, if a nearby unit hires rude or incompetent staff, consumers may assume that every branch of the business has the same approach to customer service and avoid yours.

But remember, in the same way, the positive performance of other franchises can boost your reputation and profits, so it works both ways.

Understanding the pros and cons of franchising

Every business has its downsides, and if you’re willing to look beyond the challenges, the franchising industry could offer huge rewards for you. If you want to start a company without business ownership experience, or in a sector you’re not familiar with, the franchise model is ideal for you. In short, if you’re willing to spend a little bit more money for the rights to use proven business strategies and access to expert guidance, running a franchise could be the perfect option for you.

Investing in a Franchise

We have a whole range of franchise opportunities on our books, so, whatever your passion, working style or budget, there’s bound to be a franchise out there for you. To find the franchises that are currently looking to expand by taking on new franchisees, browse our franchise directory. Alternatively, use our Menu navigation on our homepage to filter your choice by location, sector or investment price.

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