The pros and cons of owning a franchise

Subway franchise. Picture: REUTERS/NOOR KHAMIS

Subway franchise. Picture: REUTERS/NOOR KHAMIS

Advantages of owning a franchise include:

A franchise comes with a logo and name. This eliminates the cost of having to come up with a name and all the work that goes into registering your business.

You’ll also have access to systems that are used across the franchise group. These are part of the package and are set up.

You’re going to be part of a broader marketing network, meaning you won’t have to worry much about coming up with your own marketing campaigns and financing them out of your own pocket.

Franchises have central support systems that range from IT support to assistance with business management. Some franchises have representatives that provide all kinds of support services such as accounting systems to ensure that your business runs smoothly. You’ll also be trained on how to use these systems.

It’s very important to have trained staff, and franchises offer this. The training can cover day-to-day tasks and extend to more supportive roles that make staff members’ lives easier.

Buying into a franchise means you have immediate access to an extensive and rich network of other franchisors. These networks are useful beyond ensuring brand continuity. Having access to other members could end up being a valuable learning experience.

One of the biggest worries for new business owners is finding the right location to set up their business. Depending on which franchise you’re buying, this might not even be an issue. Just make sure the location is busy, safe and easily accessible for customers and staff. But there are disadvantages to owning a franchise.

These include:

Buying a franchise of a well-known brand comes at a very high cost. There are specific details you’re contractually obliged to stick with, so be prepared for huge upfront costs and ongoing fees such as royalties that are paid to the brand owner.

You should also be aware that owning a franchise store means you will have almost no autonomy. Marketing campaigns and product or service specifications, for example, are controlled centrally. You’re also limited in terms of securing suppliers, which could be a problem should you end up with a poorly serviced store.

Walking away from your franchise isn’t a simple matter of putting up a “For Sale” sign. The process is lengthy and potential buyers need to be approved by the franchisor.

These pros and cons are generic and this list is by no means exhaustive.

Speak to previous owners as well as franchisees in your area to get perspective on what it takes to run a successful franchise. And make sure you buy a franchise from a reputable franchise group.

You also need to be aware that buying a popular franchise brand won’t work if the market isn’t there.

While the support system will help you take care of the administrative side of marketing, it’s important to know and understand your market’s needs.

If you are buying a franchise that is already operational, make sure that the particular branch has a good reputation, and that the staff are well-trained, customers are happy and the business is thriving.

If it isn’t, you should have a plan for approaching these shortfalls should you still decide to buy it.

Remember that each branch in a franchise is different and you should understand your particular branch.

It may belong to an extensive network, but the customers, staff and regions aren’t the same.

• Tsamela is the founder of piggiebanker.com. You can follow her on Twitter @DineoTsamela