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3 Reasons Why You Shouldn’t Start a Franchise

21/10/2020

We all know that starting a business isn’t a one-size-fits-all sort of thing. What works for one person will not for someone else, and that’s a good thing. If there were only one solution, then everyone’s business would look the same.

We embrace that variable experience at Entrepreneur. It’s why, in addition to general guides on starting a business, we offer insight from experts in their respective fields, along with inspirational advice. We know you’re going to need a lot of resources to make your business successful.

So, while we take a lot of pride in putting together our Franchise 500 list, we also recognize that it isn’t the right path for everyone.

Here are three reasons why a franchise may not be for you.

1. The cost to start a franchise

Not everyone has seven figures to spend on our No. 1 franchise, McDonald’s, which costs anywhere between $1,008,000 and $2,214,080 as an initial investment. But, for many of us, even paying the $2,095 for our cheapest Franchise 500 entry, Cruise Planners (No. 60) can seem overwhelming.

Most franchises offer help with financing (especially if you are a veteran of the military), but they also tend to have a minimum net-worth requirement. You can get estimates of both of these numbers on each Franchise 500 franchise page, but you can get a better sense of what you’ll need by directly contacting the franchise you are interested in.

Even if you have the liquid assets to get a franchise up and running, it doesn’t mean you are good to go. You also need to think about royalty fees and, depending on the franchise, employee salaries and maintenance costs. You can see that starting a franchise isn’t just something you do on a whim; it takes consideration, certainty and financial security.

What you can do instead: If you’re low on funds, you might consider starting out as a solopreneur, using your time as a substitute for money. This is actually an important step for many business leaders, because it forces them to learn about every role within your business.

When you’re finally ready to hire employees, you’ll know what traits and skills are most valuable and make better hiring decisions as a result.

2. The lack of independence as a franchisee

Running a franchise definitely comes with some independence. You will need to make plenty of important decisions, which can shape the culture and success of your business.

But the same things that are great about a franchise -- the amount of support, experience and branding you receive for investing -- also limit your options to a certain degree. If you run a McDonald’s franchise, it’s not like you are going to change the logo or decide on company colors or slogans: You’re going to sell Coca-Cola products and Big Macs.These brands have become successful because people know what to expect from them. You can’t buy a longstanding franchise unit and expect to revolutionize everything. If you have the desire to make something totally new, then, franchising might not be for you.

What you can do instead: If you can see a problem within an industry and know how to fix it, see if you can monetize it. Many entrepreneurs work with what they know: solving problems they’ve come across in their daily lives. Maybe one day McDonald’s will end up paying to use your solution.

3. The passion you need to run a franchise

One of the most common attributes among successful entrepreneurs is focus. When they have a big idea or dream, they don’t let themselves get distracted with things that will not help them move forward. They perfect that idea and everything around it -- from the product to the sales pitch and branding.

Starting a franchise can be a valuable investment, but it is an investment. It takes time, it takes money, it takes energy. Unless you already have experience running a franchise, you might not have time to focus on anything else. And that’s okay. Butdon’t simply assume you’ll still be able to pursue your dream project in your spare time. You might not have any spare time, and even if you do, you’ll be distracted.

What you can do instead: Try partnering with local businesses, who can sell or promote your product or service. That way, you can still enjoy the sort of branding and support you wanted from a franchise while building your big idea. It’s the best of both worlds.

While these are a just a few things to consider before you start a franchise, there are also plenty of reasons why joining a franchise is a great opportunity, including working with an established brand and the support you receive.

Whatever the case, you’re going to need hard work to see success, so make sure you pick a path you believe in and go at it with everything you have.