Do you love working in the hospitality industry but want to profit directly from your work as an owner? As a fledgling entrepreneur, you really have two options. You can either build your own start-up business, or you can invest in a franchise business that has all the foundations you require already in place.
As somebody who wants to be their own boss, set their own hours and regain control of their working day, there is an obvious appeal to starting a business by investing in a franchise opportunity.
While building your own startup comes with a lot of unknowns, a franchise is an investment into an already successful, established business model that’s working within the industry.
But, that’s not to say that everyone is cut out to be a franchise owner. Just like any business, there are advantages and disadvantages to owning a franchise that potential buyers must evaluate before they make their decision.
If you’re an entrepreneur looking to become a franchise owner within the hospitality industry, in this blog we take a look at the pros and cons of franchising to help you decide whether owning a franchise is worth it for your specific needs.
What does it mean to own a franchise?
Owning a franchise is an opportunity in which entrepreneurs are able to buy an established business with branding, process and marketing material already in place. The franchisor grants the franchisee the right to sell its products or services in a specific area or location, using the franchisor’s trademark and product name.
The franchisee will pay an initial investment fee as well as ongoing royalties to the franchisor, and in return, they will receive a license that grants them permission to use the franchisor’s branding, sell the franchisor’s product or service and receive ongoing support.
What are the pros of owning a franchise?
There are a number of factors that make owning a franchise worth it for those looking to open their own business within the hospitality industry and get away from the grind and hustle of working in a restaurant or bar.
Here are some of the tops advantages that come with franchising:
You’ll receive ongoing support
Unlike with a start-up business where you will be completely left on your own to figure out how everything works, with a franchise you will receive ongoing support and training programs created specifically to help you grow your franchise business. Whether you need help with sales, marketing or human resources, franchisees are designed to provide support to your business every step of the way.
Skip the start-up stage and jump straight to a business with an established reputation
With franchising, one of the biggest advantages is that you’ll be investing in a business that already has strong brand recognition and an established reputation within the hospitality sector. You likely won’t have to educate potential customers about who you are and what you do, you will immediately have credibility with consumers.
It’s easier to access financing
It can be incredibly difficult for aspiring entrepreneurs to secure the necessary capital to launch a start-up business. In general, creditors have stringent criteria and risk mitigation procedures that make it tough for potential business owners to access financing. When it comes to franchisees, however, lenders look favorably on this type of financing due to the franchisor’s existing track record and reputation within the market. Typically franchises are seen as less risky investments by banks.
Be your own boss and regain control of your lifestyle
Working in the hospitality industry is tough. Particularly in times of economic downturn, it requires long, hard hours and little pay. Franchising gives entrepreneurs that aren’t happy with this to be their own boss. As a franchise owner, you can create a flexible schedule and set your own hours that give you a new level of control over your work-life balance. It’s a fantastic way to make a lifestyle change, while still staying in the industry that you are passionate about.
What are the cons of owning a franchise?
On the other hand, owning a franchise isn’t for everyone. Here are a few of the disadvantages of franchise owning that should play an important role in your decision of whether owning a franchise is worth it to you.
Startup costs can be higher
The costs of buying a franchise business are typically always more expensive than building your own start-up, and that’s because you're investing in the processes and trademarks of an already successful business. This initial fee can be a stumbling block for many entrepreneurs who do not have the money or cannot find the financing for it.
It’s less flexible than owning your own business
As a franchisee, you have to abide by the rules of the franchisor to meet the terms of your licensing agreement. Though you will have autonomy in how the business operates, for the most part, you will have to follow rules around what products you sell, what technologies you use and sometimes even what your employees wear. Owning a franchise offers more structure, but less scope for innovation.
It’s not for everyone
Owning a franchise is rewarding, but also hard work. People with poor time management and customer service skills may struggle with the responsibilities of operating a franchise. Franchisees need to be organized and prepared to act as team leaders, to ensure that both their employees and their clients thrive.
Are you interested in learning more about owning a hospitality franchise? Sculpture Hospitality, a pioneer and innovator in the inventory management market for bars and restaurants, has a range of investment opportunities from small to large around the world.