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Buying a Franchise: A Sure Solution for Success? 

Buying a franchise: An overview 

Many people have found buying a franchise to be the ideal small business opportunity.  A franchise is a business which has a contractual relationship with a larger organization (the franchisor) that has already established a well-known product line or some type of service. When buying a franchise (as the franchisee) you are then allowed to operate under the franchisor's name and often receive additional corporate guidance in exchange for a fee. Many of the most successful small-business chains such as McDonald's and many others are examples of franchise businesses. 

However, buying a franchise may also include such small-business opportunities as owning a car dealership.  For example, if you were to open a licensed Toyota dealership, you would be selling cars franchised to you by Toyota. Automobile dealerships are an excellent example of a franchise in which you are selling a name-brand product to the customer.  When you're buying a franchise of this type, you pay a fee to the carmaker for selling the car, and your commission is based on how many you sell. 

Buying a franchise entails many advantages including that a franchise product is generally well-known from advertising and marketing done by the franchisor.  Some franchisees can also advertise within the guidelines and acceptance by the franchisor.  Some franchisors actually maintain ownership of some of their stores or restaurants and franchise out others. 

A business-format franchise, in which you're buying a franchise with all the parts ready to roll, can be very costly.  However, a nice advantage is that you are running a business with the backing of a major company.  Also, by starting out with an established  brand, popular name and reputation, you would draw customers much faster than you could with a “brand, spankling, new” business. You would be able to get all of the necessary parts including fixtures and products directly from the company, as well as guidelines for operations.  Buying a franchise will allow you to have a working system in place that includes product distribution, signage, marketing assistance and guidelines for even hiring individuals.  Also, buying a franchise such as Dunkin' Donuts would help you to  jumpstart your business as it is already know well-known to the public, but also allows you to buy raw materials in large quantities, providing additional vehicles to profitability.  Also, buying a franchise also allows you to raise your profit margin in several other ways such as with McDonald's, or Burger King, who will do plenty of advertising and promotion.  Also, training, bookkeeping systems and even financing options are frequently available when buying a franchise. 

For some people, a negative aspect of buying a franchise is that you have to rigidly follow the structured guidelines determined by the franchisor.  You usually have very little flexibility to do things your own way.  When you're the owner of a franchise, you still have to play by the franchisor's rules.  You might find this advantageous in that the rules will help you to establish and operate your business, but you also might find  it limiting in that you may have additional ideas that you may feel would work better.  When buying a franchise there is a trade-off: You get a business and customers at the beginning, but you don't have a great deal of control when it comes to decision-making.  In addition, franchisors may ask for initial investments of upwards to $300,000 and often more.  On top of that, you may be required to pay a percentage of what you sell, and may be at the mercy of the franchisor if they decide to shut down your location. 

Information from Everything: Start Your Own Business Book by Richard Mintzer 

Web page and Starting Your Own Small Business Course by Paul Susic Licensed Psychologist Ph.D. Candidate  CEO/President Susic Psychological Consulting P.C.