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Rockville Entrepreneurs: Consider the Pros and Cons of Franchise Ownership

As an entrepreneur, you have many options when it comes to starting a business. One option is to open a franchise. Franchises can be a great way to get your feet wet in the business world with less risk than starting a business from the ground up. But before you sign on the dotted line, it's important to weigh the pros and cons of franchise ownership to see if it's the right fit for you. The following guide from the Rockville Chamber of Commerce will help you decide.


Pros of Owning a Franchise


1. The Risk Is Lower

When you open a franchise, you are investing in an already-established brand. This means there is less risk involved than if you were to start a business from scratch. The franchisor has already done all of the hard work of building the brand and developing the product or service, so you can hit the ground running.


2. It's a Known Entity

Another benefit of owning a franchise is that you piggyback off the franchisor's brand recognition. People already know and trust the brand, so half of the battle is already won. All you need to do is open your doors and start selling.


3. Customers Are Included

Another advantage of owning a franchise is that you will have an established customer base from day one. People who are loyal to the brand will seek out your location because they know what they're going to get: a product or service that they love and trust.


4. Less Training Required

When you open a franchise, you will have access to trained staff who can help you get up and running quickly and efficiently. The franchisor will provide you with all of the training materials and support that you need to get your staff up to speed on everything from customer service to daily operations.


Cons of Owning a Franchise


1. Less Autonomy

One downside of owning a franchise is that you will have limited autonomy compared to if you were to start your own business from scratch. The franchisor exerts a lot of control over how you run your business, from what products or services you sell to how you display signage in your store. If you're someone who likes to be in complete control, then franchising may not be for you.


2. Startup Costs Can Be High

Another potential downside is that the startup fees can be quite high, ranging anywhere from tens of thousands to hundreds of thousands of dollars. In addition to the initial investment, there are also ongoing royalties that must be paid to the franchisor, which can eat into your profits.


3. Limited Financial Privacy

When you're part of a franchise, your financial information is not private. The franchisor has access to all of your financial records and knows exactly how much profit (or loss) your business is making on a monthly basis. This lack of privacy can be frustrating for some entrepreneurs who prefer to keep their finances close to the vest.


Franchising 101: LLCs and Business Plans


If you think franchising is right for you, then there are some things that you need to do in order to get started on the right foot. First, consider setting up your business as an LLC (limited liability company). This will help protect your personal assets in case your franchise runs into legal trouble down the road, since an LLC in Maryland shields your home, car, and personal bank account from being liable in a lawsuit. You’ll also enjoy tax benefits and flexibility in how you structure your company.


Second, write up a comprehensive business plan. This document should lay out everything from your target market to your marketing strategy and financial projections. Your business plan will be essential when it comes time to apply for financing.  Banks and other lenders want to see that you have a well-thought-out plan before they invest any money into your venture.  If you don't have any experience writing a business plan, there are numerous templates and resources available online that can help you get started.


There are a number of advantages and disadvantages to franchise ownership. On the plus side, franchisees benefit from the established brand name and reputation of the franchisor. They also receive support in the form of marketing, training, and operational assistance. In addition, franchisees often have access to financing and other resources that they might not otherwise have. On the downside, franchisees may have to pay high initial fees and ongoing royalties. They may also be required to adhere to strict rules and regulations set by the franchisor. Overall, franchise ownership can be a great way to get started in business, but it's important to weigh the pros and cons carefully before making a decision.


Looking to build your business’s presence in our community and beyond? Join the Greater Rockville Chamber of Commerce!


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