The Pros & Cons Of Buying A Franchise In 2021

Pros & Cons Of Franchise Buying In 2021

To say that 2020 was a tough year would be quite the understatement. The pandemic wreaked havoc on public health, the education system and the economy, bringing immense stress to businesses and households across the country. Even now, as recovery begins to unfold, we see the lingering effects of a weary market and record-low unemployment. As business owners everywhere work to regain control and set a course for success, some have gravitated toward the prospect of buying a franchise. 

So, why are franchises still attractive to business owners, given the current economic climate and the many existing uncertainties? There are actually a number of reasons why now might be the ideal time to make a franchise investment. In an effort to provide clarity to those who may be considering this route, here are some important insights regarding the pros and cons of buying a franchise in 2021. 

Proven Systems In Unpredictable Times

Starting up a new business is complicated, and turning a profit takes time. From marketing to operations and everything in between, getting an enterprise off the ground can seem daunting to prospective owners, especially in these unpredictable times. Fortunately, the franchise system alleviates a great deal of that stress. 

Franchises are often attractive to business owners because of the turnkey solution they provide. You’re not starting from scratch. In fact, you’re operating from an already established and proven business model. This minimizes the headaches of starting from square one and shortens the lead time to generating profits.

When you opt for a franchise, there’s an established brand in place. Often, you even get the benefit of a marketing plan and/or materials to help bring in clients or customers. This means you’re not spending precious time researching and building your marketing campaigns or forging a reputation in the market.  

Of course, the flip side of this is that you don’t have total control over every aspect of the business. For some, this is a check in the “con” column. But for others, having all those extra layers of built-in strategy and support makes the idea of buying a franchise worth it. You may be in business for yourself, but you’re not in business by yourself.

Leaning Into Labor Advantages

April’s unemployment rate clocked in at 6.1 percent in April, as reported by the U.S Department of Labor. And while we’ve seen the numbers improve marginally since the lowest lows of the pandemic, there’s still a tremendous way to go. Interestingly, this historic access to labor is a check in the “pro” column for prospective owners looking to buy a franchise this year. 

Even under better economic conditions, franchises already have a leg up on finding qualified workers, simply because they come with the status of a recognizable name, as well as established recruiting and training programs. Now factor in the reality of large swaths of people seeking jobs, and the labor outlook for new franchisees is even more promising in 2021. 

It’s true that some franchisors require additional investment and/or royalty fees to account for services like worker sourcing, onboarding, training and retainment. And if you take the franchise route, you don’t necessarily have a choice in how to go about these aspects of building and managing your workforce. Therefore, this is a crucial consideration for business owners. If mitigating the risk of labor challenges is a more pressing concern than retaining total authority over these types of issues, however, now may be the ideal time to make a franchise investment.

Nuances Of The Franchise Network

Business risk is always scary, and many prospective owners look for opportunities that close in on that risk with success-driven strategies. One of the reasons why franchises feature a lower risk level than other new ventures is the network inherent in the business structure. 

When you buy into a franchise, you buy into a piece of an established corporation that has essentially cloned itself into other entities. That means there is a connected system of owners running the same business model and offering advantages such as: 

  • Deeply discounted purchase prices for needs like product inventory, operating supplies and equipment, as the franchise can negotiate deals to acquire these goods in bulk
  • Easier access to funding, including SBA loans
  • Support from other franchisees in the network to help get questions answered and overcome the business’s learning curve

A non-franchise business, on the other hand, can have a much more difficult time bargaining with suppliers, obtaining the necessary loans and creating a path to business success. That makes the network aspect of a franchise opportunity an important element to consider. 

Coming Up With The Necessary Capital

Speaking of loans, let’s talk about the capital expense of starting a business and how buying a franchise in 2021 might lean in the prospective owner’s favor. Investing in a new venture isn’t exactly cheap, and some may worry whether going into business for themselves is actually beyond their financial capabilities. Fortunately, this year brings some interesting economic realities that could improve your opportunities for accessing the necessary cash. 

Franchises usually necessitate a significant upfront investment, as well as yearly royalties and fees to cover the cost of belonging to the franchise name and/or accessing the franchisor’s support services. Some even require the buyer to have a minimum net worth (and cash or liquid assets for future use), which could be problematic depending on your financial status. 

Plus, as prospective franchisees seek real estate for their storefronts, they’ll find the market wide open in terms of options and pricing. The challenges posed by the pandemic forced many types of businesses to vacate their premises over the past year. Therefore, franchisees requiring a physical location will have a large swath of properties in prime locations from which to choose, many of which are available at incredibly discounted price points. Having highly affordable and attractive real estate options can help close on financing offers, which are already set at lowered rates. 

All things considered, 2021 is looking like a good time to invest in a franchise opportunity. If you’ve been attracted to this option as a business owner, be sure to understand these realities as you move forward in the decision-making process.

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