Principio Marketing

BOOK A CONSULTATION

 

SUBSCRIBE TO
OUR NEWSLETTER


MY ARTICLES

IS BUYING A FRANCHISE A GOOD WAY TO START A BUSINESS?

For many, the dream of starting a business is in direct conflict with the fear of the risk inherent to that venture.  But there is a tempting option; franchise. You are on your own but you benefit from a structure and a knowhow that reduce uncertainty.

But is it really such a good option?

Depending on the franchise considered, initial investments can be astronomical, royalties and purchasing agreements are very restrictive. In addition, franchise contracts are largely in favor of the franchisor, which means that if things do not go well for your business, the head office has many options to limit their losses - mostly at your expense.

Finally, for many, starting a business is also about having the freedom to do what you want. With a franchise, you become very  limited; schedules and what you can offer are pre-determined, and so is how you deal with customers. In short, the franchisor tries to limit the gray areas as much as possible.

For some, buying a franchise is still an  interesting choice because of the security it offers. That said, for many who are starting out and have a large sum to invest (initial down payment you would have for the franchise), you would do well to consider investing in your own business, rather than someone else’s. Furthermore, nothing is stopping you from taking a look at how the franchise system operates and then applying the aspects that impress you to your own business - without having to pay royalty fees every month.

Of course, you might have to compete with a giant and a marketing expert. But remember that all additional charges push the breaking even point that much further out of reach. To be profitable as a franchisee, your revenue will have to be much higher than that of an independent business. Higher sales also implies heavier infrastructure and more employees, and that means that you will be managing personnel. So if your initial idea was to be hands-on in the kitchen, rather than a manager, think twice about that franchise.

 

Stéphane Elmaleh-Riel, B.Ed, MBA
Marketing consultant