Is Buying a Franchise Profitable?
Franchises provide a way to invest in a business that has stood the test of time, and they remove much of the inherent risk of a start-up. If you’re ready to be your own boss or start a rewarding side hustle, they could present a good business opportunity.
But is buying a franchise truly profitable? That depends on a number of different factors. Here are three important considerations to help you decide:
Franchises pack hefty startup costs
You know the big brand names—and many of these can indeed “bring home the bacon.” But some of the top franchise opportunities can cost upwards of $1 million just to get off the ground. So, it can take some time for the profits to offset the initial costs—if ever. And many of these well-known franchises require proof of large amounts of capital in order to even invest. There are less expensive franchises out there. But, let’s face it, less expensive franchises are less expensive for a reason—they’re often smaller and less well-known—meaning less market share and, ultimately, profitability.
And ongoing fees . . .
If the startup costs weren’t enough, franchises also typically require ongoing fees and royalties. These never end—as in, never, ever. The reality is that a franchisee (you, the hopeful entrepreneur) is always indebted to the franchisor (the parent company). And these ongoing expenses can, in some cases, drastically cut into your profits.
Franchises may actually inhibit business growth
Franchisors have a vested interest in the success of their franchisees. And that’s undoubtedly a good thing. But the way they seek to ensure franchisee success is to impose strict control. This has a couple of notable implications for franchisees.
First, rigorous guidelines and regulations from the parent company guarantee consumers have the same positive (fingers crossed) experience at every franchise they visit. This means as a franchisee, you don’t actually get to freely run “your” business as you might choose. In short, you may end up being more of a glorified employee of the franchisor rather than truly living the American Dream.
Second, many franchisors protect their brands by implementing geographical restrictions to control the amount of “X franchise vs. X franchise” competition. This means franchisees may not be able to grow their business to other cities or states. And, let’s face it, expanding your business may be pretty important if the goal is to increase your take-home pay.
A Different Option
In a nutshell, franchises can be a good option for some of the entrepreneurial at heart. They provide a tried-and-tested business model and have a vested interest in their franchisees’ success (after all, someone needs to pay those fees and royalties). But franchises can also be costly and restrictive. They typically define precisely how their franchisees must operate which all too often leaves the business owner feeling like little more than a glorified employee.
Luckily, there’s a different option. It’s not a traditional franchise, but it’s also not starting a business from scratch. It’s a unique business opportunity found at the intersection of “Starting From Scratch Drive” and “Franchise Street.”
Healthy YOU Vending provides all the support of a traditional franchise without ongoing royalties and fees. We are not a franchise; we’re better than a franchise. We don’t tell our operators how to run their businesses or limit them to specific geographic locations. In fact, expanding a Healthy YOU Vending business simply consists of placing more machines in more locations. That’s it!