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Austin TX Business Law Blog

Thursday, October 12, 2017

Benefits and Drawbacks of Buying a Franchise

Should I buy a franchise business in Texas?

When it comes to starting your own business, you have numerous options available to you.  Budding entrepreneurs may consider buying a franchise, rather than starting your own concept.  There are several crucial advantages to buying a franchise, but also some limitations of which you should be aware.  Our Austin, Texas franchise law lawyers at The Kumar Law Firm PLLC explore some facts you should know when contemplating buying a franchise.  
National Recognition and Lower Failure Rates 

One potential benefit of opening a franchise, as opposed to your own concept, is the instant name recognition.  Well-known franchises have a national brand-name recognition. As such, your new customers will already be familiar with your concept and hopefully be lining up to try it as soon as you open.

Statistically, franchisees are more likely to succeed than those who start an independent business.  With high rates of failure among independent businesses, franchises are unique in that they generally have an already proven concept.  Even further, your franchise will often provide you with help starting your business.  In many cases, you will receive in-depth training, marketing assistance, and more.  For newcomers to the business world, a franchise may present the perfect opportunity. 

Ongoing Costs and Limited Control 

Despite the many benefits of a franchise, there are some potential drawbacks.  When you buy a franchise, you agree to abide by the many rules that govern the franchise.  Your product will likely be fixed by the national company and you may be required to use set suppliers.  If you are someone that wants a degree of creativity or control over your product or service, a franchise might not be the right fit.

Further, franchises come with ongoing fees.  As a franchisee, you will need to pay the original franchise fee, along with royalties, which consist of a percentage of your business’ revenue.  Your franchise may also charge you for fees associated with advertising and other business services.  

It is important to know that not all franchises are alike.  Carefully research your potential franchise business and consult with a franchise law attorney for vital legal help with opening your new business 

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