The franchise can be a great option for you to start your own business. One of the best things about franchising is using a proven system that has proven to be successful. There are several franchise pros that are pretty self-evident. Before you spend a large deductible fee, you should consider some of the drawbacks of doing so.

1. Be prepared for the expense. Franchising can provide huge financial rewards. The initial costs of a quality and in-demand franchise can be quite high. In today’s market, most turnkey franchises will require a minimum of $50,000 in the form of a franchise fee, startup capital requirements of at least $25,000, and a minimum of 6 months of ownership is generally recommended. household expenses saved to avoid having to take money out of the business until long after the initial start-up.
2. Be prepared for the job/hours required. When you start a business for yourself, you’ll find that a 40-hour work week is a thing of the past. Most new franchise owners find that a more typical workweek is around 80%2Bhours per week. This is especially the case if your new franchise is in the retail field. When you buy your franchise, you are really buying yourself a job of 80% 2B hours a week. Never forget that if a new employee decides not to show up for work 10 minutes before their shift, you have to cover/substitute them until they can find a replacement.
3. Speaking of employees. Employees are going to be an essential part of your success. Employees are also going to consume a lot of the 80%2B hours you put in each week. From scheduling, payroll, administration, training and development to a host of other topics, employees will be one of your biggest challenges. If you have supervisory or management experience, you will certainly be able to bring some skills to your new business that will be of great use to you. However, if your past work experience has provided you with little time to lead and supervise others, you may want and should consider hiring a manager from the outset. The learning curve for dealing with and working with employees cannot be shortened. You have to spend your time learning how to deal with all of the above problems and at the same time running a successful business.
4. Prepare for the unexpected. There has never been and never will be a business that does not have to ride over the inevitable pothole. There will be times when vendors and vendors demand your payments at the same time. There will be times when your unemployment taxes, sales taxes, business and personal income taxes appear to be due at the same time. You need to financially prepare for these bumps and know that they are part of the business. This will also be the time when you will have to give up your own paycheck until cash flow returns to normal. If your business and your cash flow are seasonal, you need to be able to manage your cash flow well. Seek professional advice and assistance as the cost will be much less than learning the hard way!
5. Be prepared for the social consequences. When you own and operate your own franchise, you’ll soon find that your friends and family don’t see you much anymore. It will be essential to take advantage of the time that is available Quality time with your family and friends. You will also find that some people will change their opinion of you. Now that you are a business owner, some people will believe that you are now rich and will try to take advantage of you or put you down in subtle ways. Of course, this doesn’t always happen, but be prepared anyway.
6. Be prepared to be more of a follower than a leader. When you buy a franchise, one of the things you will need to do is follow a strict system. For example, a food franchise will give you little or no flexibility to vary your menu. You will be asked to provide a system exactly like all other franchises with the same brand. If you are a truly enterprising person, you may find that this is a system that will pigeonhole you. New ideas and cutting-edge marketing are something you won’t be able to do.
7. Be prepared to pay a lot in royalties. Royalty fees are part of every legitimate franchise. Every dollar that comes into your business will be subject to a percentage of royalties. Most franchises are in the 3-10% range. This of course comes straight from the top. of its gross sales. This amount of money can be quite significant during the term of a franchise agreement. One million dollars in annual sales for 15 years at a 5% royalty rate will equal $750,000 directly from your bottom line.
8. Franchise contract and franchise term. The franchise agreement will specify exactly how many years the franchise will cover. Most franchises will be a 10-15 year agreement that will require your royalties and full tracking of your system. The downside of this is that you be at the mercy of the franchisor at the end of the term and your new royalties could no doubt increase. It is very rare for rates to drop. Even if you choose to end the franchise relationship, there is no guarantee that you will be able to provide substantially the same products/services to your now loyal customer base without the franchise. The company now also has the right (and will generally exercise this right) to place a new franchise in its same location. I’ve even seen them open a new business a block away from their old franchisee.
9. Purchase or rental of real estate. You will need to decide whether to buy/build an existing facility or whether or not to lease a location. In either situation, you will need to ensure that your mortgages or leases align or will align with the expiration of your franchise agreement/term. At only 15 years, buying may not be the best option, as you’ll want to have a 20% 2B year term if possible for your commercial property mortgage at your bank. You don’t want high monthly payments up front to maximize your cash flow for the first few years. Leasing a location is typically in 5 year increments and the renewal rate can be quite high and if your franchise agreement covers 15 years you could have 3 leases by then and you may have purchased your location.
10. Rent rent rent. The final consideration to keep in mind is that your prime location today may not be 10 years from now. If you open a sandwich shop across from a large industrial plant, you may have the perfect location. What if the business goes under or has mass layoffs? Now your location is completely wrong. You have to break the leases/sell the property (both will cost you a lot of money), find a new location, and actually start over. If the franchisor has several other franchises in the area, you may find yourself relegated to a less than prime location to rebuild.

My goal is certainly not to discourage you from buying a franchise. The franchise model is one of the proven ways to own and operate a successful business and help ensure it’s open five years from now. Systems work as long as you run the system! These 10 areas of consideration really need to be thought through and evaluated before you make your final decision to part with all your hard-earned money! If you can live with these areas of concern and can confidently address them, definitely move on. Success is 90%%2B your attitude and 10% your system.