Becoming your own boss is a dream come true for many; however, if you are like most people, you may be unsure about the best way to go about it. Fortunately, there’s more than one way to become a successful business owner.
It could be launching an independent business, buying an already established company, or investing in a franchise with support systems already in place, self-employment offers near-limitless opportunities for success and financial freedom.
For those considering franchising, we’ve compiled some franchise pros and cons that are helpful to be aware of before you decide to invest.
Franchisee vs. Solo Business Owner—What is the Difference?
Franchises are systems-based businesses that operate under a parent company’s existing brand through a franchise agreement. Franchisees sell specific products and/or services already created by the franchisor using the branding material and business model provided.
In most cases, the franchisee doesn’t need to have previous experience in the industry they invest in, as franchise brands provide extensive hands-on support and training. By comparison, starting a business from scratch is exactly that—you build the business from the ground up.
Entrepreneurs who launch a startup are primarily on their own in everything from market research and branding to advertising and employee training. Being an independent business owner comes with sometimes greater risk, however, buying a franchise isn’t for everyone.
Some entrepreneurs find that operating a franchise can be restrictive if they are the type to pivot business decisions quickly or want unlimited creative freedom. However, if you find the right franchise business for YOU, then you’ll likely feel right at home.
Access Your Welcome Package which includes
- Discovery Video – 15 min overview of this opportunity
- Franchisee Testimonials
- The Nurse Next Door opportunity
- Access to our calendar to book a 1×1 call.
Advantages and Disadvantages of Buying a Franchise
There are currently an estimated 773,600 franchise systems in the United States, which verifies the popularity of the franchise model among companies and entrepreneurs alike. If you’re considering buying a franchise, you’ll want to weigh the pros and cons of being a franchisee.
5 Pros of Buying a Franchise
Buying a franchise is widely considered a ‘safe bet’ among entrepreneurs looking to maximize their returns without taking on excessive risks. For many entrepreneurs, investing in a franchise offers the ideal balance of independence, structure, and ongoing support.
1. Proven Systems and Processes
When buying a franchise business, you’ll gain instant access to the parent company’s proven system, which they likely have been perfecting through years of trial and error.
These systems include marketing, advertising, sales strategies, and operational tools and processes already prepared for you, which can shave off years of work.
Not only that, but the franchisor will walk you through their systems and processes through valuable training. Instead of feeling unsure leading up to the launch of your business and beyond, you’ll feel confident, prepared, and well-equipped to take the lead in running your franchise operation.
This expedited operational expertise is something that is only accessible through a franchise business model eliminating a huge step in business ownership.
2. Less Risk Than Owning Your Own Business
Of course, there is always an element of risk involved with starting any business; however, fortunately, there is a proven way to reduce this risk by investing in a franchise.
According to the U.S. Department of Consumer Affairs, fewer than 5% of franchises fail within the first year, while about 30% of independent companies are shuttered within 12 months or less. A franchisor can help set you up for success by eliminating many of the trials and errors that can hinder a business’s success.
From there, it is up to you what you do with that information. Franchise businesses still take hard work and determination, so while it is not a get-rich-quick scheme, it is an excellent way to start a business with less risk of failure.
3. Easier to Secure Financing
When you have the backing of a big company like a franchisor, banks and other lenders are much more likely to loan you capital to cover the start-up costs. You can go to a bank with any business idea, but doing this independently usually, they will look more closely at your financial projections and other success factors before offering you financial assistance.
However, when raising capital for a franchise business, many lenders are already familiar with the franchise company and their success rates, making it easier to secure financing.
4. Built-in Community and Support
A major appeal to many business owners when joining a franchise is the instant network that can provide business support and a community of peers who own the same type of franchise business.
These franchise community events are a great way to connect with other like-minded people and coaches, which can be invaluable along the journey of a business owner. Many independent businesses have to seek this out independently, but this can take time and effort that they may not have.
At Nurse Next Door, our franchisees receive close mentorship from our business coaches. We help them navigate everything from launching their franchise to keeping track of metrics to ensure they are hitting their business goals successfully each year.
Check out what we do at Nurse Next Door to support our franchisees!
5. Brand Recognition
Brand recognition is one of the main advantages of franchising. When you start a business from square one, you need to build your way up to having a loyal customer base who know, like, and trust your brand. On the other side of the spectrum, franchise businesses already have a built-in customer base ready to access your products or services.
This instant profit potential helps to substantially raise your likelihood of having a successful business earlier.
5 Cons of Buying a Franchise
While there are a lot of advantages that come with buying a franchise, being a franchise owner isn’t for everyone. Here are some cons to consider:
1. Potentially Higher Start-Up Costs
Investing in a franchise business can have a higher start-up investment than opening your own business. As a franchisee, expect to pay an initial franchise fee, a licensing fee, and other ongoing fees such as royalty payments. While this may seem restrictive to many entrepreneurs, it does not have to be negative, as franchise businesses do have a higher likelihood of success.
The initial investment costs and fees cover everything from advertising costs, access to the franchise system, a community of fellow franchisees, and corporate team support.
Tip: During the franchise discovery process, ask the franchisor to see their Franchise Disclosure Document.
This document will tell you your initial cost and general financial information to help you decide if this franchise operation is right for you.
2. Less Flexibility to Make Big on the Spot Business Decisions
The idea of becoming a small business owner may appeal to you as you may like the idea of running your own company and being your own boss. It is important to understand this early on as some entrepreneurs would rather have the final say regarding how they run their business and make big decisions on the fly, which isn’t the case when you own a franchise business.
In your franchise contract, you’ll agree to let the franchisor make the decisions regarding advertising and marketing, branding, pricing of products or services, and overall how to business operates. While this may not appeal to the more free-spirit entrepreneur, it is also WHY some people want to enter the franchise industry, as it creates a stronger, more cohesive brand.
3. Potential Conflict with the Franchisor
When signing the franchise contract, you agree to the existing systems and processes. Still, there is always a chance you may disagree with the parent company’s decisions. When this happens, there could become a strain on the franchisor/franchisee’s business relationship.
To avoid this, it is essential that during the discovery process to ask the right questions of the franchisor and the other franchisees. Find out how conflict is handled within the company, especially if this is your first franchise opportunity. You’ll want to make sure that culturally you’re a good fit before entering into this long-term commercial relationship.
4. Bound by a Contract
As mentioned, when becoming a franchise owner, you sign a franchise agreement and enter into an ongoing legal and commercial relationship. As this contract is legally binding, you cannot break the contract if you have a change of heart or don’t like the direction things are going.
Before signing, ensure you fully understand the contract and agree with all points.
Many potential franchisees will consult a franchise attorney or a franchise consultant to clear up any confusion before signing. This can help ensure you don’t sign something you don’t understand or agree with. During the franchise discovery phase and comparing franchises, conduct thorough research as not all franchises are the same; this research should include:
- Market analysis
- Proper site or territory selection
- Ask to see their financial information
- Create a business plan
- Thoughtfully read the Franchise Disclosure Document
5. Choose the Right Franchisor
Before going ahead with your franchise investment and signing the franchise contract, eliminate as many points of concern ahead of time. Purchasing a franchise is a big decision, and you’ll want to ensure you fully trust the franchise you are joining, as they will ideally become your long-term business partner.
Understand that the franchisor’s issues can become your issues, so ensure you read the Franchise Disclosure Document closely and solicit the advice of a franchise attorney, as they can better determine if the franchise company operating under false pretenses or not. Ultimately, you want to weed out the franchises that either won’t be a good fit for you or companies that are not looking out for the best interests of their franchisees.
Find out how to open a franchise in this helpful 10-step guide.
What Are the 3 Types of Franchises to Consider Opening?
Franchises have traditionally focused on food service and hospitality, with most franchises being fast-food restaurants, hotels, and motels. As the franchise model gains traction with savvy entrepreneurs, new franchise opportunities are emerging across various industries.
It is a good idea to look into what industry interests you the most, as not all franchises are created equally and can help you avoid the potential disadvantages of franchising. Here are some examples of franchise ownership across a few industries:
Food Franchises
In the United States alone, there were 32,027 full-service restaurants and 188,402 quick-service restaurant franchises in 2021, with more expected to open in 2022.
Franchising in the food industry can be highly lucrative but comes with a higher franchise fee. For example, the average start-up cost for a Mcdonald’s is between $1,314,500 and $2,306,500. While not all food franchises cost this much for the initial investment, it generally comes at a higher price due to Mcdonald’s having a highly established brand and customers, trained staff, and inventory costs.
However, if you love the idea of blending a passion for food with franchising, a restaurant franchise could be the perfect fit.
Children’s Franchises
If you love children, then a children’s franchise opportunity may be a good option. The type of franchise systems in this industry span from art programs, education, and virtual learning to clothing and entertainment.
A quickly growing sector in franchising and one many are considering. For example, children’s education is expanding, and parents are spending more money. Care.com’s survey revealed that “in 2022, 51% of parents say they spend more than 20% of their household income on child care, and 72% of parents report spending 10% or more.”
They also found that “43% of parents say it’s much harder to find child care over the past year.” With parents having trouble finding childcare, there are more and more opportunities for child educational franchises.
Home Health Care Franchises
Senior Care is one of the fastest-growing industries worldwide, so it makes sense that several health and wellness companies have embraced the franchise model. The U.S. Census Bureau reports that as of 2020, about 73 million seniors age 65 and older in the United States and about 61 million American adults live with a disability. By 2030, one in five Americans will be 65 or older.
Given these stats, it’s easy to see why franchise businesses that focus on home care services for seniors and people with disabilities, such as Nurse Next Door, are popular among investors. Nurse Next Door was established in 2001, making it one of the best-recognized and most trusted names in the industry and is the only franchised home care system to offer franchise partners a 24/7 centralized call center, and investors don’t need a medical background.
Access Your Welcome Package which includes
- Discovery Video – 15 min overview of this opportunity
- Franchisee Testimonials
- The Nurse Next Door opportunity
- Access to our calendar to book a 1×1 call.
