Starting a business: to franchise or not to franchise
November 6, 2021 by agutting@reviewjournal.com
Filed under Conversation
By Craig Kirkland, EVP/Director of Retail Banking, Nevada State Bank
Craig Kirkland, EVP/Director of Retail Banking, Nevada State Bank
If you’re interested in starting a business, you may have thought about buying a franchise. I own a multi-unit franchise together with my son, who runs the business — so I know there are pros and cons to being a franchise owner.
Advantages of Buying a Franchise
With a franchise, you tend to have an established roadmap that eliminates a lot of guesswork and can save you from making costly mistakes. You can talk to other franchisees to get a feel for how the business really works. Corporate support from the franchisor may include initial and ongoing training, as well as national or regional advertising.
To the extent you must operate within the franchise playbook, you are your own boss. You do the hiring and firing. You decide when to show up and when to leave.
You can set pricing and strategize on marketing. It could be a great opportunity to bring in a family member.
Maybe it’s more passive and you could hire someone else to run it. There may be attractive tax advantages. (Consult your tax professional before making any decision). Yes, you must follow the roadmap, but it could be a profitable venture.
Consider These Risks First
Running any business can be challenging, especially with residual effects of the pandemic. Here are some factors to consider:
• As a franchisee, you have limited control. The franchisor often decides what you buy and from whom and at what price.
• If you are actively operating your franchise, you may have just bought yourself a 40-50-60-70 hour a week job.
• You may be the one who has to deal with a highly agitated customer.
• Your business could fall victim to some unfortunate incident posted online.
• While a franchisor gives you support, it may cost you in the form of royalty fees, marketing expenses, and other fees.
• Like any entrepreneurs, franchisees run the risk of failing. You run short of capital; a competitor opens across from you; margins erode from wage pressure; and so on.
Even considering all the “cons,” do not be deterred — rather, be prepared. Continue to educate yourself and ask as many questions as you can before making any decision.
