Rush on Business
Lesson #2 From Hard Luck Franchisees: Buying a Franchise with No Brand Recognition
The franchising model is available in almost every industry. (Even law firms apparently). Reports have indicated there's nearly 1 million established franchised businesses in the U.S. Among those franchises are many unknown (or relatively unknown) franchises. In my opinion it is critical to buy franchises with brand recognition.
Does that take out many new franchises from consideration? Perhaps even the future Subway or McDonald's? Why yes, it does. Let someone else be the guinea pig. (This shouldn't be too hard in Iowa because most franchises become popular somewhere else before coming here). My rule of thumb - ask 10 of your friends if they have heard of your franchise opportunity. If they haven't, perhaps you should reconsider the opportunity. The upfront costs of franchising are often considerable higher than starting your own business. If the brand isn't recognizable, can you really justify the higher costs associated with buying a franchise or perhaps you are better off starting your own independent business?
I've seen several franchisees buy unknown franchises. In many instances it hasn't worked out. They spent a lot of money but really didn't get much in return. Part of the appeal of franchising is to license someone else's trademark. An easily identifiable trademark gives a franchisee a potential leg up. It doesn't guarantee success, but all things being equal, look to franchises with brand recognition. Sinking money into an unknown franchise is generally a poor investment in my experience.
For a good discussion on the pros and cons of buying well-known franchises read Does Buying a Big-Name Franchise Ensure Success?
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