1. Advantages of buying a franchise
2. Disadvantages of buying a franchise
You'll have a proven business model to follow. 2. You'll get to learn from an experienced franchise owner. 3. You'll have a network of other franchisees to learn from. 4. You'll get to use the same brand/logo. 5.You'll have the ability to choose your own management company. 6. You'll learn how to run a business that is unique from the competition. Franchise decision makers are looking to buy into this strategy for a number of reasons. They want first-mover advantage. They want to hold onto that brand for years. They want to learn how to run a franchise well. They also may be considering a franchise to eventually grow into another type of business, like a buy and hold investor. Franchise investing is a growth strategy, typically starting at only one location. This approach can help jumpstart growth and allow the investor to build out their business slowly, focusing on growth first. When buying a franchise, there is usually one owner, several franchisees, or both. Some franchises are buying and holding, and could likely put many more locations into their portfolio as time goes on. Ideally, this growth strategy is taking place on its own and the owner is the one in charge, but it will require time to educate the franchisees. How's this for upside? Having a healthy and profitable business can be really exciting for the real estate investor. But there is also the point where growing becomes hard, or the market you are buying into does not provide the ultimate value in and of itself. If this is you, there are some advantages to purchase a franchise. There is a set structure inside the franchises you purchase, which will ensure a solid business that will keep growing as your business grows. Typically, only the first franchisee brings some of the books and leases to the franchise, and some take it upon themselves to start operating out of that location.
Disadvantages of buying a franchise
There are several reasons why you should consider buying a franchise if you are interested in starting your own business. The most attractive reason is that it can help you avoid much of the trial and error that goes into starting a business from scratch. On the other hand, there are also several reasons why you shouldn't buy a franchise.Ultimately, it depends on your situation and the type of business you're hoping to start, so it's important to look at the pros and cons of each.
As discussed earlier, Russian immigrant Saundra Alexander started a candy and cake business called Saundra Alexander's Sucrose in San Francisco in 1980. But things weren't going too well, and she wanted to rid herself of her business. After some thought, she decided she should look for a buyer for the business and lease it from the buyer. At the time, it was illegal for non-US citizens to buy businesses.
Three businesses were interested in bringing Saundra Alexander's Sucrose under their ownership, but it wasn't until three men who were visiting California to look at real estate in San Francisco that Alexander found a buyer. The business would go under the ownership of Cindromat Corporation by 1986, but Saundra and her husband would remain in San Francisco to run the business. It took Saundra three more years to sell the business, and now she and her husband both own part of the company.
Here are Saundra's three main costs when doing business as a franchisee:
When you own your own business, these costs don't exist. If you run a franchise from scratch, these costs all apply to you, so this is an important factor to consider when you are deciding whether or not this is the right option for you.Saundra's experience with buying a franchise also shows that you have to engage in a lot of work when you are buying a franchise.
Deciding if you can buy a franchise
If you're wondering if franchising is right for you, there are a few things you should consider. If you're an entrepreneur who likes to be in charge of your own destiny, then franchising might not be for you. Franchising is different than owning your own business because it's an agreement to be part of a certain brand.Whichever franchise agreement you choose doesn't have to restrict your freedom to start your own business, but it's important to note that all franchising agreements have unique rules and restrictions.