Pros and Cons of buying a Top Franchise Business for Sale
Pros and Cons of buying a Top Franchise Business for Sale
There are many who dream of having a successful business, either by bringing to life some exciting business concepts, or by designing a business around existing market need gaps and opportunities.
However, as appealing as this thought might be for aspiring entrepreneurs, there is always the risk of the business not working out. When one adds to this the fact that starting a business from the ground up requires not only a great idea and a business plan, but a lot of time, effort, money and even some degree of luck, along with the passion, drive and hard work to make it a viable and profitable venture.
This is when buying a top franchise business for sale seems like a good option, as one can easily bypass the rigorous work required to set up a business, and be assured of a model that is already successful in the market. However, while there are numerous advantages to franchising, it isn’t as rosy a picture as it might seem. There are many aspects that would need to be carefully considered before choosing to be a franchisee, and this blog is intended to throw light on some of the most important ones.
Pros of Investing in a Top Franchise Business for Sale
1. Lower Risk due to Proven Business Concept
Unlike a new business whose market viability is unknown, a franchise business is already a tested, effective and proven business model, supported by a larger organization with a history of success. This backing itself eliminates the risk of venturing into unknown business territory, and the entire process of trial and error until you zero down on the best model, process and approach. You can hit the ground running, and save on the time and effort of setting up.
2. Brand Recognition & Customer Base
This is among the key reasons why a lot of entrepreneurs consider buying a top franchisee business for sale. There is already a good degree of brand recognition and trust among the target customers, which is something that would otherwise take a long time and a lot of resources to establish. This would also make it easier to attract both the right team of employees, as well as customers who are already familiar with the brand.
3. Gain Business Experience, with Training and Support
Franchising is a comparatively easier way to run a business, as you not only bypass the start-up phase, but can also avail the advantage of the intensive training and support offered by the franchisor company. This would not only include the initial support, such as site selection, design, processes, corporate partnerships, but also ongoing employee training, advertising, marketing and more. It also allows you to gain from the collective knowledge, experience and market insights gained by the business leaders through the years. And the best part – you needn’t have prior experience in the same vertical or market as you will be taught everything you need to know.
4. Ease of Availing Finance
Most businesses require financial support at the time of setting up, and a franchise business is no different. Securing business loans is not always easy, as you would need to meet the stringent eligibility criteria set by the lending organization. However, seeking financing for buying a top franchise business for sale might be comparatively easier, given the fact that the brand will have an existing equity and success history in the market.
Cons of Investing in a Top Franchise Business for Sale
1. High Initial Investment
Depending upon the type of business and the market success of the franchisor, the initial investment cost could be high, and in some cases, even higher as compared to starting your own business. This initial fee usually allows the franchisee to legally use the brand name and all related assets for a specified period of time. In addition to this, some franchisors might also charge monthly royalty fees that would need to be factored in as part of your regular costs. However, another way to look at this is as a fee that covers the years of hard work and efforts put in by the franchisor, to perfect and develop the business.
2. Limited Creative & Operational Control
Because a franchisee will be a part of an existing well-known brand, there will be mandates to follow certain processes and systems, both in the daily operational aspects of the business as well as when it comes to hiring new talent, marketing, advertising and more. This will take away the creative control that most business owners really like. You would need to adhere to existing policies, and will not have the freedom to try out new things as you would, with your own business.
3. Risk of Bad Reputation
Just as the franchisor’s brand equity can benefit the franchisee, any bad performance or bad press could really affect the reputation of your own business as well, even if you are doing everything as mandated. This is something that you would have little control over, and is a risk that you would need to be prepared for, if you do choose to go down the franchising route.
4. Limited Time Contractual Agreements
Franchising entails entering into an agreement with the parent company, or franchisor. These agreements detail out the dos and don’ts of operating under the brand. One small mistake could result in breaking the agreement, and losing one’s business. Moreover, when the agreement ends, there is no obligation on part of the franchisor to renew your contract, and if that happens, then you would need to be prepared for that. However, this again, could be seen as an opportunity to gain valuable business experience on an existing brand, before starting off on one’s own.
To sum up, whether you choose to buy a top franchise business for sale or start off on your own, you would require to do your research and due diligence before deciding on either way. Evaluate the pros and cons carefully before you make any decision. You could also consult our team at Absolute Business Brokers if you’d like to discuss more on this, or explore the option of buying another existing small business for sale.