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Can Franchising Be Your Stepping Stone Towards the American Dream? (The Pros and Cons of Franchising)

Published on March 22, 2014 by Franchise Chatter Leave a Comment
in Guest Blog Post

This is a guest blog post by Darren Jamieson.

Owning your own business, being your own boss; however you phrase it, it seems to be the modern expression of the American Dream. Many of us don’t even want to be Warren-Buffett rich; we just want a “comfortable” living, and to live on our own schedule instead of our company’s. The question is, should you leave the security and routine of a full-time job to immerse yourself in franchising?

Purchasing a franchise seems like a great way to take a step towards that American Dream. With a franchise, many of the difficult pieces of starting your own business are already completed. You’re purchasing a name, a concept, and, in many cases, a reputation. All you need to do is operate it, and your dream is about to become a reality. Right? Well, maybe.

The ups and downs

There are some definite pros to purchasing and starting a franchise:

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  • You are handed a proven and functional business model. Legal issues have been addressed. Mistakes have been made and solutions found.

    Darren Jamieson


    Learn Which Franchises Can Make You Rich
    Darren Jamieson, Technical Director of Engage Web
  • With your franchise purchase, you are handed a reputation for your business. You’re not just opening a sandwich shop, you’re opening up a Subway. Everyone knows about Subway already, so a lot of your work in creating customer awareness has been done for you.
  • Some franchises offer mentoring and training. Some also handle different parts of the operations for you, such as accounting, IT support, HR, or training materials. Others don’t. Either way, that is all laid out when you sign, and you know exactly what you’re getting into.

If you publicly express a wish to go into franchising, however, you will inevitably hear some of the counter arguments. In fairness, many of these apply to any sort of business ownership, but here are some of the most common cons cited:

  • No one will be helping to pay for your health insurance. Depending on how much your employer contributes, the sticker shock on this one item can be very intense. The Affordable Care Act is changing the rules on how individuals purchase insurance, but there’s no such thing as cheap, good health insurance, especially if you’re not single.
  • No one is contributing to your retirement funds. There are a number of tax-advantaged options for self-employed persons that can make up for the 401k or 403b that might have been funded through an employer, but losing the employer match can affect this.
  • No more paid time off. Whether you usually used it for sick days or a two-week vacation, there’s no more paid vacation for you. If you don’t work, there’s no income. If you need some time off, you need to have budgeted money to cover the income loss, have employees available to run the business for you while you’re away, or spend your “vacation” tied to your cellphone to put out fires as they happen.
  • Unlike freelancers, who often can start working for themselves alongside another job with very little investment, then gradually transition to working independently, franchising and start-ups both require a lot of cash to get the business up and running. How much depends entirely on the franchise you’re looking into.

What are my chances of success compared to a start-up of my own?

Statistics on the Internet may lead you to believe that your success is virtually a given, with the figure of 95% success rate among franchises commonly cropping up. Unfortunately, the Small Business Administration has spent the last decade or so trying to remove that statistic (sometimes jokingly called “The Stat”) from the Internet, citing that the studies that provided it were years out of date, and have since been disproven. The International Franchise Association (IFA) has also urged its companies not to use it.

So are you really likely to be successful with a franchise?

Experts say that it’s hard to tell. The businesses that tend to succeed are those that have the capital to get them through the early years, and that’s not different for franchises. Too many franchisees may scrape together just enough capital to make their initial purchase, and have nothing left if income isn’t what’s expected from day one.

If you’re interested in purchasing and operating a franchise, but you’re not sure where to start, there are companies  and services that are able to help you get started, such as Franchise Chatter and the IFA. They help you understand what you want to do, what franchises you can afford, and provide a realistic idea of income and expenses. Don’t underestimate the value of simply speaking to other franchise owners as well.

Franchising isn’t a guaranteed formula for success, but for the right person, with the right temperament, and with sufficient capital to back up the initial purchase, this can be an excellent way to start the journey towards being your own boss. The early years as a business owner are always grueling, and franchising is no exception to that, but if you’re willing to put in the hours, the work, and the cash, running a franchise can have many of the perks of being a business owner: setting your own schedule, working within your dream field, and contributing to your community as one of the many small businesses in the U.S. that are said to make up the backbone of the nation’s economy.


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That, while perhaps not the American Dream, is far from a rude awakening.

Bio

Darren Jamieson is the Technical Director of Engage Web and writes for Minuteman Press on franchising in the US and throughout Canada, Australia and his native United Kingdom. He has extensive knowledge of the franchise industry, and of running a business, having helped many franchise clients through Engage Web.


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