Key Takeaways:
- Franchising offers major advantages such as a proven business model, established brand recognition, structured training, and easier access to financing, which help reduce risk compared to starting an independent business from scratch.
- Franchise owners benefit from ongoing support, tested products and services, and a higher likelihood of early success, but must also navigate restrictions on operations, branding, and marketing set by the franchisor.
- While franchise ownership includes upfront and ongoing fees, understanding the balance of benefits and limitations is essential for determining whether franchising aligns with your goals, risk tolerance, and preferred level of business autonomy.
We know investing in a franchise can be a difficult decision, that's why it's important to weigh the pros and cons before you get started. While the benefits that franchising brings include a proven business model, assistance in understanding financing options, training, support, and brand recognition, there are also fees and restrictions to think through.
Interest in entrepreneurship and business ownership has remained strong in the six years since the COVID‑19 pandemic. In that time, many professionals have continued reevaluating their careers, some seeking greater independence, others looking for more stability or a fresh start outside traditional corporate roles. Franchising remains a compelling path for those wanting to launch a business with built‑in support and proven systems, and its popularity continues to grow today and well into the foreseeable future.
In 2024, there were 831,000 franchise establishments in the U.S. with a projected growth of 2.5% for 2025, reports the International Franchise Association (IFA).
As you consider whether franchising is the right path for you, it's important to consider the positives and negatives when it comes to franchising.
Pros of Buying a Franchise
There are many advantages to having your own franchise compared to starting an all-new business, which is why so many prospective owners are choosing to do so. The top benefits include:
Bypassing the Start-Up Phase
One of the top advantages of franchise ownership is that these businesses have a higher success rate compared to start-up independent businesses. That’s because franchises come with a well-established business model so you don’t have to start one from scratch.
In fact, the start-up phase of a new business can be overwhelming, and often is a major contributor to failure. There are so many moving parts. From coming up with a clever and innovative idea to building a great team to execute it, it can be difficult to keep track of everything, let alone succeed.
When you buy a franchise, you take advantage of the brand's extensive knowledge and industry experience instead of struggling to figure things out through trial and error. This allows franchise owners to focus on learning the industry and how to operate their franchise, rather than wasting precious time in the start-up phase.
Another reason why new businesses often fail is choosing the wrong product or service. According to CB Insights, 35% of small businesses fail because of a lack of demand. Many small business owners don't know or can't predict demand for their products or services in advance, leading to business failure.
Buying into a franchise means that you are offering products and services that have been established and tested. This is especially true in the home services market, where the demand for essential services tends to be consistent over time. Both advantages will help limit your risk of failure.
Financing Options
A significant challenge for small business owners is securing capital to start or grow a business. While buying a franchise does come with initial costs, purchasing a franchise is viewed by many lenders as less risky than starting a business, making it easier to secure financing.
Banks and other financial institutions are more likely to finance a franchise than a start-up business, making it easier to qualify for a loan. In fact, the U.S. Small Business Administration (SBA) reserves a portion of their loan allotment specifically for franchises, making an SBA loan one of the best ways to finance your new franchise location. Another option is borrowing from your 401K.
Training and Support
Another clear advantage to investing in a franchise is that you don't need industry-specific experience to make your franchise successful. While knowledge of your industry or business principles is always helpful, if you've been looking for an opportunity to work in a field that is new to you, franchising is a great way to do so.
The reason that prior experience isn't strictly required is that all successful franchise owners go through an intense training program provided by the franchisor. This comprehensive training covers everything from operating procedures to marketing strategies and provides franchise owners with the tools you need to be successful. At , this training occurs in three main areas:
- Initial training: In this phase, you will gain upfront education about the franchisor as well as detailed information about the products and services you will be offering. Operations manual, compliance, recruitment, customer relationship management, business plan and more.
- On-Site training: After the initial training is complete, your next step is hands-on training at your franchise location or shadowing a current franchise owner.
- Ongoing business coaching Finally, all franchise owners engage in ongoing support and consultation with a designated franchise coach. Not only does this system help keep your growing business on track, but it will also ensure you are always up-to-date on system operations and any future changes.
Good franchisors invest heavily in each franchise owner. This is in the best interest of both you and the company. After all, the success of you and your franchise is directly linked to the reputation and credibility of the franchisor. See why so many entrepreneurs decided to franchise with a Neighborly® brand:
Brand Recognition
Franchising also offers instant brand recognition and marketing resources. The brand name is also the identity of the franchise. If that franchise is well-known and respected, the brand name gives franchise owners a distinct advantage over similar independent businesses.
In fact, being able to operate under a respected brand name is a major benefit of opening a franchise.
In many cases, a well-known brand name will come with a loyal customer base that would otherwise take time to establish. This can make marketing your franchise business much easier and help you build a local customer base more quickly.
Cons of Buying a Franchise
As with any business venture, there are also a few disadvantages. Some of the potential downsides of buying a franchise include:
Restrictions and Regulations
When you buy a franchise business, you enter into a formal franchise agreement that outlines how to run your business. For some entrepreneurs, this can feel limiting and seem to offer little room for creativity.
For example, in your franchise agreement, a franchisor can put restrictions or regulations on things like:
- Operating hours
- Vendors & products
- Decor
- Pricing
- Advertising and Marketing
For this reason, owning a franchise may not be the best option for an entrepreneur who values the ability to make creative decisions.
Franchise Fees
Another potential disadvantage to franchise ownership is having to pay franchise fees. We say potential, because it all depends on how you view the franchise fee. These fees are essential to a franchise model because they help fund ongoing business resources that franchise owners need to run their business successfully.
Franchise fees are the costs associated with buying and setting up a franchise business and can range from a few thousand dollars to hundreds of thousands of dollars. Some common franchise fees include:
- Initial Franchise Fee: This is a one-time fee that you pay when you first sign your franchise agreement. It allows you to use the franchisor's business name and model.
- License Fee: Also known as royalties, this is a periodic fee (usually paid monthly or quarterly) that you must pay to the franchisor for ongoing support and use of their business name and model.
- Other Fees: Some franchisors require franchisees to pay other ongoing fees, such as paying into a collective marketing fund. This fund is used to pay for advertising and promotional activities that benefit all franchisees in the system.
Is Franchising The Right Choice for You?
Ultimately, it is important to understand the pros and cons that come with buying a franchise so that you can more easily make the right choice for your business. For many business owners, the positives of owning a franchise greatly outweigh the negatives. The best way to determine whether franchise ownership is right for you is to research your options and talk to both the franchisor and current franchise business owners.
Think franchising may be the path for you? At Neighborly, we are dedicated to your success and helping you build your future with franchising. Contact us when you're ready to learn more.
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