Is Buying A Franchise A Good Business Decision?

If you’re interested in starting your own business, but have little business experience, then one good reason to buy a franchise is that since all the groundwork has been done, your probability of success is higher than if you were to start a business from scratch. Moreover, this is something that banks and other financial lenders recognize, so it’s far easier to get the financing you need to start a business.

franchising business

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When you buy a franchise, you’re purchasing a turnkey business. Since it’s a proven system, you don’t have to learn through trial and error what products to sell or how to organize the business. Additionally, you won’t have to struggle to gain some market share—all the work in creating brand awareness has already been done.

Many different types of franchise models are available. A product distribution model is a retail model. So, if you were to buy a UPS store franchise, you would obtain the right to sell UPS trademarked goods. A product distribution model started in the 19th century by Coca-Cola, allows you to distribute the products or services of a franchise model. A manufacturing franchise gives you manufacturing and selling rights. And a business format franchise provides you with an established business, which includes name and trademark, for you to run independently. This type is often seen in fast food and retail chains, and it’s the most prevalent model.

Reasons to Buy a Franchise

Three good reasons to buy a franchise are training, marketing assistance, and exclusive territory.

  1. Training: Before the grand opening of your business, the franchise company will train you at their corporate office, as well as provide on-location training before you open your doors. Although you’ll get a good idea about all aspects of business operations, you will still receive ongoing support when necessary.
  2. Marketing assistance:When doing your own local advertising, the franchisor will support you with marketing guidelines, graphics, samples, and templates. In addition, the franchisor will continue to market the brand name.
  3. Exclusive territory: Since you’ll be granted an exclusive territory, you won’t have to be concerned about your marketing efforts being diluted by customers patronizing the stores of other franchise owners in close proximity. And, once your business is successful, you can even open up a second unit in another location.

Buying a Franchise vs. Starting an Original Business

It’s a sad comment on modern economic times that the majority of new businesses fail within a short time. So, unless you have a burning desire to bring a new product or service to the marketplace, then buying a franchise is a safer bet than starting from scratch. You will be tapping into an existing market with a proven product demand, following a tested way of operating the business and be taking fewer business risks.

Advantages of a Franchise

There are numerous advantages to buying a franchise, and here are five well-known ones for investing in one:

  1. You will have your own independent small business, but you won’t be alone because you can rely on all the benefits of your relationship with a large, well-established business network.
  2. You can start a fresh new life as an entrepreneur even if you’ve only been an employee most of your working life. Business knowledge and experience isn’t necessary to do well because you will be provided with training on exactly how to operate and promote your business.
  3. You will have a higher chance of running a successful business than if you were to start your own business from scratch. This remains true even if you happen to have had plenty of previous experience as a business owner when you launch your startup.
  4. You will have an easier time getting a loan than if you were to start a similar type of business on your own because lenders base their decision on the strength of the franchise’s business records rather than your own personal business history.
  5. You will not have to work on developing a brand image, as the franchise will have already established its reputation. Moreover, when you market your business, you will be able to use tested marketing materials and leverage national advertising resources.

Making a Decision

If you like the idea of buying a franchise rather than starting your own business, you may still be wondering what type of franchise to buy. First, select a type of business that engages your interest, and then choose a franchise that has a unique business model, because that would reduce the level of competition.

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