If you want to start a company, one basic choice that you need to make at the beginning is whether you want to start a brand new company or buy a franchise license. If you choose to buy a franchise, you get to operate with the branding and business model created by the parent company — McDonald’s, for example, or Pep Boys.
A franchise license does come with fees. The popular chains are the most expensive. You may end up paying tens of thousands of dollars per year. If that feels like it would hurt your bottom line, what are the advantages?
The clearest advantage is name recognition. When customers already know your name and like your brand, they don’t care what location they go to. You can have loyal customers who will be excited to buy on your first day open for business. Plus, people who are unfamiliar with the area will likely traffic a place with a known name before a place they’ve never heard of.
You also get to take advantage of national and local branding efforts. The franchise works hard on your behalf to create that brand recognition and to get people to your store.
For these reasons, franchises are often thought of as very stable. The failure rate is lower. If you’re more interested in success and stability than in doing your own thing, this is one way to get there.
Of course, franchises come with downsides, as well. You have little creativity and flexibility, and those fees add up. But you just need to know about all of your options and the steps to take when starting your business.