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You want to own your own business. You have been considering buying a franchise and may be asking "Why buy franchises?" Below are the reasons typically provided for buying a franchise business. There is merit to these reasons, and there are qualifications.
One of the purposes of BestFranchise.org is to help you identify the BEST FIT for your passions and abilities. If buying a franchise is a good route for you, we help you separate the best franchises from the worst franchises.
The reasons for buying a franchise include:
- Proven business: Opening a franchise comes with the advantage of knowing that this business has been successful in other locations. The idea and processes of running this business have already been proven.
- Lower risk: Risk of failure can be lower with a new franchise business than starting a brand new business. There is a higher likelihood of success if the same business has done well in other areas.
- Established customer base: The brand name that comes with the franchise is already recognizable to consumers, without the franchisee (purchaser) having to spend a lot of money and time in establishing a new brand. The brand awareness provides security and trust to the customer who expects uniform quality to be provided. There is already a customer base.
- Economies of Scale in Marketing: The franchisee can benefit from any advertising or promotion that the franchisor (owner of the franchise) does at the national or local level, without absorbing the cost.
- Initial and ongoing support: The franchise has a vested interest in how well you do. It provides ongoing training, ongoing support, system upgrades, product enhancements, and question and answer resources. The franchisor offers experience to franchisees in such areas as accounting procedures, personnel and facility management, and business planning.
- Easier Access to Loans: Getting financing for a franchise is easier since many franchise names and their reputations are known by the lenders. Banks are more likely to fund franchisees. The SBA has a short list of franchises for which streamlined SBA loans can be granted.
- Purchasing power: Relationships with suppliers are already established; affording the opportunity to buy in bulk saving a lot of money on materials and supplies.
The most compelling answer to "Why buy franchises?" boils down to risk reduction. If you start your own business by yourself, you will have more issues to resolve, processes to learn, less economies of scale, and less credibility with the SBA loan people. If you are placing much of life savings at risk, you want to keep that risk to a minimum. Franchises help you reduce risk, assuming you have the intelligence you need to compare and assess the quality and profitability of franchises that interest you. |
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