Owning A Franchise – Good Idea Or Bad Idea?

Owning A Franchise – Good Idea Or Bad Idea?


Working as a Chartered Accountant and also having had the privilege to be quiet extensively involved in the franchise industry, I have often been asked whether it is a good idea to open a franchise or not. Hopefully this article will clarify certain of the advantages and disadvantages of owning your own franchise and clear up any questions you might have.

When it comes to starting your own business, many people consider buying a franchise as an easy way to make a success. While this could be correct, not all franchises are the same, and not everyone is cut out to be a franchisee.

Advantages Of Owning A Franchise

1. More likely to succeed

When you buy a franchise, you are buying an established idea or brand that has already proved to be successful.

It is shown that franchisees stand a much better chance of success than people who start their own independent businesses.

2. Help with getting set up and continuous help

You get a lot of help setting up your franchise and running it afterwards. When you buy a franchise, you get all the equipment, supplies and training you need to start the franchise.

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3. Make money

A franchise business can be very profitable.

4. Well-known brand

Many well-known franchises have very wide brand-name recognition. When buying a franchise you are almost guaranteed to have an immediate customer base.

5. Franchisor buying power

Your franchise will have the benefit of lower costs due to the bulk buying opportunity and benefits available to the franchisor that would be passed onto you as franchisee.

Related: Should You Purchase An Existing Franchise?

Disadvantages Of Owning A Franchise


1. Minimal flexibility

One of the main disadvantages of buying a franchise is that you have to do it the franchisor’s way. There is not much room for you to make your own decisions.

2. Franchise fees

Other than your initial joining costs, one of the biggest ongoing costs are the franchise fees that are payable to the franchisor on a monthly basis. This is usually based on a percentage of your franchise turnover.

3. Lack of on ongoing support

Even though many of the franchisors offer ongoing support to their franchisees, there are those who only assist with the set up and then leave you on your own.

4. Highly competitive

Be careful of buying a lesser known franchise. Just because a business is offering franchise opportunities, doesn’t mean there is any guarantee that the franchise you buy will be successful. There are many franchises out there and everyone wants a “piece of the pie”.

5. Initial costs of buying a franchise

Buying into well-known franchises are very expensive. You will need to have your own capital to contribute and will, in most instances, require further funding from a financial institution.

Related: Franchise Or Start-Up?

Is Owning A Franchise For You?

Buying a franchise is like buying any other business. It is important to do your due diligence and investigate the franchise properly. However, if you are the right sort of person for a franchise operation and pick the right franchise, being a franchisee can indeed be the path to success.

Michael Steenkamp
Michael has been with RSM South Africa since January 2001 and has been an audit partner since September 2011. Michael has extensive audit experience across various industries including manufacturing, retail, franchising, logistics, property investment and consulting. Michael represents RSM South Africa as a member of the national Quality Assurance Committee which is responsible for upholding and maintaining the quality service that the firm provides. Michael is also a member of the RSM IFRS Lead Member Firms as head of IFRS at our Johannesburg office. Along with his extensive experience, Michael brings with him the commitment to work closely with all clients and to provide the best possible service.

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