Here's the situation that aspiring franchise owners commonly find themselves in: they have adequate resources to use as capital, they want to stop being a paid employee, but they have zero entrepreneurial skills. And so they end up choosing to buy a franchise because it's the perfect compromise'or is it?

What is a Franchise?

The term franchise is used to refer to a business that's using the name, logo, and system of operation of a parent company in exchange of a franchise fee and a share of profits. Other rights beside the ones mentioned previously may be included depending on the agreement between the franchiser (the parent company selling franchise rights) and the franchisee (the buyer, which may be an individual or a company).

Pros and Cons of Owning a Franchise

Just like any other business, there are both benefits and drawbacks of owning a franchise, and whether you'll have a positive future with a franchise or not depends on numerous factors.

PRO: A Franchise Allows You to Hit the Ground Running.

When you purchase a franchise, you need not suffer months or even a year of finding out for yourself who your target market is and what's the best way to operate a business. Everything is handed to you on a silver platter.

CON: Franchise Fees are Usually High.

And in return for spoon-feeding you a whole new business, you're usually asked to pay a hefty franchise fee and which may take you long years to recoup. Thus, if you have not enough money set aside, purchasing a franchise can be quite the burden.

PRO: A Franchise Has Lower Risks than a New Business

No matter how good your product is, there are more risks associated with opening a new business compared to owning a franchise. There is no basis to determine whether a new business will succeed or fail while the success of the parent company or its other franchisees can be used as basis for the success of a new franchise.

CON: A Franchise Has to Strictly Abide by the Rules of the Parent Company.

Even if you think you have great and innovative ideas to improve the performance of your franchised business, the most you can do is provide suggestions. As such, there are limited opportunities for you to explore and challenge your creativity.

Factors that Affect the Success of a Franchise

Type and Success of Business ? Don't choose to franchise just from any other company. Evaluate first the kind of success the company's enjoying. Do you think your franchise can and will have the same fate? Do you think the business is just a passing interest for the public or does it show signs of longevity?

Skills and Other Qualifications ? Some franchises require the franchisee to possess certain skills and abilities and maybe even an exceptional knowledge on a given field. If you don't match the requirements specified by the franchisor, there's a good chance that you wouldn't be able to succeed in this endeavor.

Time and Management ? If you're not willing to spend sufficient time managing your business, you need to make sure that you put dependable and trustworthy people in the forefront. If you simply rely on anyone, how can you be sure that your business will continue running smoothly?

There are other factors that can affect the success of a franchise, but in the end, just make sure that it's what you really want, need, and able to handle before signing on the dotted line.