Owning a Franchise: Five Challenges to Consider


It’s a dream of millions of Americans: Running your own business. In fact, in 2020, ambitious people launched a record 800,000 new U.S. companies, capping a decade of steady growth in new business starts. That increase in business starts clearly underscores the appeal of being an entrepreneur rather than clocking in as someone else’s employee.

You might be surprised to learn that opening a franchise is one of the most common ways people enter the small business market. However, there is more to franchising than simply paying a fee to an existing company for the right to operate under their name. As attractive as owning a franchise sounds, there are a number of things to consider before making the leap into business ownership.



Take a Realistic Approach

Every year, P3 Cost Analysts brings a new slate of franchisees into our business. When we do that, we learn about the challenges that our partners often face. Everyone likely knows that starting a business requires motivation and diligence. More than that, each potential new business owner should think through the pluses and minuses of what’s ahead. In our experience, these are five of the challenges to consider.

#1: Franchises Are Expensive

Even with the most well-known brand name franchise, it will take time to be profitable. Start-up expenses include the franchise fee plus costs such as labor, supplies, equipment leases, rent, marketing and much more. Bottom line is, you’ll need cash above and beyond the franchise fee to be able to start operations.

At P3 Cost Analysts, even though our franchise fee is relatively low and there are few operating expenses for owners, we recommend new franchisees have at least 12 months of financial resources as a foundation to launch their businesses.

#2: Finding the Right Employees

It’s no secret that right now job openings are at an all-time high. In an employees’ market, many people are leaving their current positions for better offers, consequently leaving other jobs unfilled for longer periods of time. New business owners need to consider if they’ll be able to find enough good people to do the job right, therefore it’s imperative to take a realistic look at the prospects.

Because the bulk of our auditing work occurs through our headquarters, our franchisees typically don’t face the hiring dilemma that others do. That means they can put more focus on making contacts and generating new business. We’ve heard from many of our existing franchisees that because they don’t have to manage employee teams, they have more opportunity to develop large, recurring revenue streams. Our owners who want to realize growth while still hiring can do so largely free from the risk and exposure that traditionally comes with scaling.

#3: You’re Buying a System, Not a Brand

Typically, when purchasing a franchise what you are actually buying is a proven system. Yet, many franchisees think they’re buying into a brand. However, there are only a few American brands that have broad recognition, such as McDonald’s or Starbucks. By understanding that you’ve bought a system, you have better positioned yourself to make your business a success.

Through our 30 years of developing our auditing and cost-saving techniques, we’ve seen the value of having a proven system. With that, we can transfer our knowledge to our franchisees, which ultimately gives them an advantage as they launch their business.

#4: Failure Can Be Costly

Because there is a fee to become a franchise owner, many people wonder if they should instead funnel that fee into opening a business on their own for less. The problem with that thinking is that there is a cost that comes with trial and error.

In our case, our franchise fee takes into account our years spent experimenting with products, marketing techniques, hiring practices and other business processes. Whereas, people who start their business from scratch must navigate all that on their own. Moreover, since it’s virtually impossible to determine the time it will take to figure these things out, that makes it even more difficult to accurately forecast the cost of trial and error. In the end, mistakes made within a solo business will likely amount to a much greater expense than a franchise fee.

#5: It’s Not for the Faint of Heart

Sure, the daily grind of working for someone else can take its toll, but it also brings a sense of comfort and security. When you’ve got a stable place of employment, you’ve likely got the general assurance of a regular paycheck and other benefits. It can be hard to give up that predictable environment for the unknowns that come with entrepreneurship.

Owning your own business means everything rests on your shoulders — a daunting collision of dreams and reality. Here’s where the potential entrepreneur must put aside fantasy in favor of a self-check about their ability to undertake the focus, drive and discipline required to build a successful business.

Opportunity Prevails

Ultimately, owning a franchise can be a streamlined approach to being in business for yourself. From gaining the support of seasoned professionals who’ve already been down the road of starting a business to buying into a proven system of success, joining a franchise has many upsides. And, it provides an advantage for franchise business owners to realize long-term success that may elude the solo entrepreneur.


By Kris Simonich, Vice President of Franchise Development, P3 Cost Analysts

If you’d like to learn more about franchise opportunities with P3 Cost Analysts, contact us by phone at 1-877-843-7579 or send an email to info@costanalysts.com.