For many entrepreneurs thinking of going out on their own, the choice comes down to whether to start up one’s own business from scratch, or to buy a franchise and use a model that has worked for others. There are many benefits to buying a franchise, including:
1) Marketing/Brand Recognition - A franchisor will typically provide a great deal of marketing acumen to the franchisee, whether in the form of a national advertising campaign run by the franchisor, or in giving the franchisee marketing materials and training so that the franchisee can effectively market their product/service in their local community. Likewise, one of the main benefits a franchisor can provide to its franchisees is brand recognition on a national scale.
2) Legal Compliance – Franchisors typically have a legal team devoted to ensuring that all franchisees comply with legal regulations and best practices–everything from having standard form contracts with vendors to having an employee handbook. This can save the franchisee thousands of dollars in legal fees, and prevent miscues along the way.
3) Systems & Efficiency - Another major advantages for franchisees is that they can utilize the processes and systems created by the franchisor which will allow them to effectively run the business without having to re-invent the wheel each time a new issue comes up. Take, for example, McDonald’s. They teach their franchisees exactly how a burger should be prepared, sell them the cartons, cups, and napkins necessary to run the business, and provide continuing guidance on issues of safety, food preparation, employee relations, and many other issues.
However, many entrepreneurs may feel too restricted by franchises, or may want to chart their own path. This story about KFC franchisees who are suing the KFC parent company illustrates how those franchise restrictions can sometimes cause havoc. In this case, the KFC franchisees are upset that the KFC parent company is pushing a new, healthier line of food rather than marketing towards what the company has always done well–making “finger licking good” fried chicken. This lawsuit highlights the fact that, many times, franchisees are caught between a rock and a hard place when they don’t agree with major decisions made by the franchisor. While there are many benefits to buying a franchise, this restriction on freedom can be stifling for some entrepreneurs. Thus, it is a good idea for any entrepreneur to carefully think through the pros and cons of buying a franchise in their intended field. Nothing is ever perfect, but it is important to find a good balance for you personally between the freedom to run your business as you want, and having the many benefits of a franchise model.
