10 Pros and Cons of Trying to Profit With a Franchise

If you have all the makings of an entrepreneur — but have no business experience, and no clue where to start — a franchise might be the solution.

A franchise is essentially a ready-made business. The franchisor — the company that grants the franchise — gives you the product and trains you.

As a franchisee, you can focus your energy in an area that interests you. Franchises exist in every sector, including:

  • Convenience stores
  • Fitness centers
  • Hair salons
  • Restaurants
  • Bars
  • Car washes

There are many pros and cons of owning a franchise. First, we’ll highlight the good things. Then, we’ll run through some of the challenges:

Pro: You can piggyback on others’ success

Nonwarit / Shutterstock.com
Nonwarit / Shutterstock.com

A franchise is essentially a ready-made business. In exchange for your investment, the franchisor gives you a proven product and often provides training and advertising. Sometimes, it also assigns you a location.

Your contribution is time, money and labor.

Pro: You can choose from various business types

Blueguy / Shutterstock.com
Blueguy / Shutterstock.com

Whether you want to serve tacos or offer in-home care for seniors, there is a franchise for you. Here are the top five in Entrepreneur Magazine‘s Annual Franchise 500 rankings for 2018, and the initial investment required:

  1. McDonald’s: $1 million to $2.2 million
  2. 7-Eleven: $38,000 to $1.1 million
  3. Dunkin’ Donuts: $229,000 to $1.7 million
  4. The UPS Store: $178,000 to $403,000
  5. RE/MAX LLC:: $38,000 to $225,000

Not sure how to come up with that kind of money? Money Talks News founder Stacy Johnson offers up his advice in “Ask Stacy: Where Do I Find the Money to Start a Business?

Franchise business owners can choose to go with a new company or an established brand. Established companies may have a more polished plan, a greater customer base and a proven track record to offer to its franchisees. On the other hand, new franchisors may be especially invested in ensuring that their first few franchises succeed. That could mean more one-on-one attention and assistance in getting your business off the ground.

Pro: No business background? No problem

 Sorbis / Shutterstock.com
Sorbis / Shutterstock.com

One of the biggest benefits of a franchise is that it offers a turnkey way to start a business. New owners don’t need an MBA either.

The first step to becoming a franchise owner is to contact companies that interest you. Typically, you’ll spend a full day getting a feel for a company. Then, the company will vet your financials and background. If everything checks out, the company will formally present you with a franchise agreement.

Pro: You can earn a decent income

 Sorbis / Shutterstock.com
Sorbis / Shutterstock.com

You may not get rich, but chances are good you’ll make a decent living. On average, franchise owners earn $60,000 a year, according to the jobs website CareerBliss. Of course, that means many franchise owners make more — and many make less.

Pro: You’ll enjoy training and support

goodluz / Shutterstock.com
goodluz / Shutterstock.com

A good franchisor should provide assistance with:

  • Daily operations
  • Marketing
  • Location scouting
  • Training
  • Customer base development
  • Market analysis

This isn’t to say a franchise owner simply has to show up and count the money. Owners are responsible for growing their businesses, but franchisors should provide blueprints to make that growth happen.

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