Franchising as a career path: key pros and cons


When it comes to launching a business career, many people are drawn to the idea of franchising, and it’s fairly easy to see why – in essence, it offers a direct way to ‘jump on board’ with an established brand, while still providing the challenge and satisfaction of managing your own private enterprise.
It’s a much more common operating model than many people realise; indeed, a surprising number of the most recognisable brand names we all pass on the high street every day will be hanging above premises run as a franchise business. However, it’s definitely worth taking time to learn a little about exactly how franchise businesses work, and to assess the key pros and cons of buying into a franchise, before deciding whether it might be the model for you.
Typically, the franchisee – that’s the individual buying in – operates as an independent third party owner, paying for the rights to the branding, name and business model of an existing company set up and directed by someone else (the franchisor).
While the resulting enterprise or venue is privately owned by the franchisee, it’s the franchisor who decides which products and services the business sells, and how they sell them. In return for a startup fee, the franchisor will supply the independent owner with an established operating system, full staff training, and all the branded fittings and equipment required for the business to hit the ground running.
There are three main types of franchise arrangement: distributorships, trademark or brand licensing, and business format franchises. In a nutshell, distributorships operate under an agreement allowing an independent outlet to sell the parent company’s products, while brand license franchises grant an individual operator the right to use a given trademark in the running of their own business. The most common type is probably the business format franchise; many globally popular fast food chains, for example, tend to favor this latter model (which is why the products they offer are so consistently uniform across branches, regardless of where in the world they’re located).
Whether the business in question happens to be a fast food restaurant, a car showroom, a branded hair salon or a licensed fitness program, what the franchisee ends up running is one of a string of privately owned enterprises that all operate in the same way under a shared name.
For many operators, the most obvious benefit of buying into a franchise is that it gives an independent business the relatively sturdy platform of a successful trademark or brand, with a loyal customer base already established. If the parent company is of sufficient size to be administering to a large number of franchise operators, then it’s also likely to offer various additional benefits such as working with reputable suppliers, delivering comprehensive staff training programs, and providing additional high-level business support where necessary. There may also be some degree of financial backing available in the form of credit arrangements, and any marketing is generally dealt with centrally, enjoying a much wider reach than most fully independent startups could possibly hope to achieve.
In short, the big plus of running a franchise business is reduced risk – under this model, a bigger company actively wants you to succeed, and will back you to do so, because they benefit directly if you do. In many ways, it’s also one of the biggest drawbacks: in purely financial terms, operating a franchise can certainly be somewhat limiting.
For one thing, the initial startup costs are often steep, especially when looking to franchise under a very well-known and popular brand name. In most cases, not only will the initial buy-in require a hefty up-front payment, but there will be regular subsequent royalty fees to pay out of the money the business brings in (usually in the form of an annual – sometimes quarterly – percentage of takings). There may also be additional fees levied for marketing, training or equipment that are payable repeatedly over the course of a long term, locked-in contract.
Moreover, depending on the individual owner and what they’re looking for from a business career, financial constraints may not be the biggest downside of running a franchise at all; for some, the relative lack of freedom with regards to overall management control might be a much more pressing concern. Franchise operators normally have considerably less leeway to make key managerial decisions than a fully independent business owner would do, and even midsize parent companies will often have an established and contractually binding management protocol already in place for almost every conceivable day-to-day scenario.
On top of all this, there’s the risk – albeit small, if the parent company is well established – of failure higher up the chain. After all, even the most successful management of an independent franchise could eventually count for nothing if the parent company suffers a damaging loss of reputation or market position. (Of course, the ostensibly slim chance of encountering such catastrophes is what steers most operators towards franchise buy-ins in the first place.)
For anyone thinking seriously at the possibility of starting up an independent business, consideration of the above pros and cons is an important initial stage in beginning to explore whether a franchise might be an even remotely suitable option. It ought to be the very first small step on a journey through a lengthy and complex decision-making process that will also require assessment of specific franchise opportunities much further down the line: at that point, weighing up one opportunity against another is an even more involved process, as every case will inevitably have its own unique advantages and drawbacks to be investigated in depth.