Should You Buy a Franchise?

It might seem like buying a franchise associated with an established brand and business is the fast track to financial independence. But becoming a franchise owner is every bit as involved as starting your own business from scratch — it takes time, dedication, and an informed approach. But if you know the ins and outs of franchise ownership, you could reap the benefits in a short amount of time.

Ask yourself these key questions

The U.S. Small Business Administration, the leading authority on all things small business in America, breaks down just about everything you’ll need to know if you’re considering buying a franchise. And the SBA recommends starting by asking yourself five questions.

These questions all look inward at your commitment and your experience. The SBA says that you should first ask whether you’re motivated to achieve success. It might seem like a strange question, but if you don’t think that starting a business is in your comfort zone or within your abilities, it may not be the best path for you. That includes asking yourself if you feel capable of motivating others, too, since you’ll need to train employees and lead a successful staff.

A surefire way to be committed to success is to have a passion for the brand and the product. The SBA suggests asking yourself if you’re confident in the product or service you’re representing. If you don’t think a product has staying power or you’re concerned about the health or integrity of the company, you may want to reconsider your decision. The SBA also says that you’ll need to ask yourself if you feel comfortable promoting your business and brand, which comes down to comfort both within and in terms of the company and product.

Finally, experience with the industry in which the franchise operates is recommended as a must. The SBA notes that while you may typically think of franchises in terms of restaurants, Entrepreneur lists 75 different categories for franchises. If you aren’t experienced with the field, Forbes senior editor Susan Adams suggests doing enough research that you feel comfortable with the industry as a whole as well as the particular company from whom you might purchase a franchise.

Weigh the pros and cons

The Small Business Administration also conveniently offers some of the pros and cons that most potential franchisees will need to consider. The pros tend to outweigh the cons, particularly if you’re just getting your feet wet with the demands of business ownership.

In general, the advantage of buying a franchise comes from minimizing groundwork. The SBA notes that franchises offer what it calls a turnkey system — this means they’ll provide strategies for everything from daily operations to marketing to profit generation. This can make owning a franchise a great way to learn the ropes and prepare for owning your own business.

When you purchase a franchise, you also get the perks of being part of a network with other franchisees under the same umbrella. The SBA also points out that buying a franchise comes with brand cachet built-in, which means you won’t have to work as hard to craft an image or pitch a product or service. This familiarity also makes it easier to hire and recruit than it would if your business were an unproven commodity.

In terms of cons, the restrictions that come with operating under another business’ model are notable. Decisions can and often will be made without your consent or against your wishes, and you’ll have to roll with them because of the nature of the agreement. You’ll also, of course, need to make royalty payments to the company as a condition of taking on its brand and products. The SBA also suggests that startup costs will typically be higher with an established franchise. 

If you’re considering starting a business but aren’t comfortable with your level of experience or knowledge, a franchise can be a great place to start. Check with the Small Business Administration for more resources, including a list of franchises pre-approved for SBA lending