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The Pros and Cons of Purchasing a Franchise Business in Illinois

Posted on in Buying or Selling a Business

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Becoming a business owner can be a major endeavor, regardless if you are launching your own start-up or purchasing a franchise company. For those looking to start their own business, a franchise with proven systems and processes in place can provide an extra sense of security. Research shows that franchises have a better success rate than start-ups; however, embarking on a franchise business can still pose risks. That is why it is important to consult with a skilled attorney who is well-versed in Illinois business law before you decide if opening a franchise is right for you.

What Benefits Does a Franchise Offer?

Most franchises have been around for a long time, meaning they have a successful business model that enabled them to expand and open other branches or locations. One of the main advantages of a franchise is the collaboration and network that comes with a corporate entity. In addition, a franchise can offer the following benefits:

  • Name recognition: A well-known brand name can go a long way in achieving sales quotas as opposed to an unknown company that would need to rely on word of mouth to obtain a customer base. 
  • Proven processes/system: The franchisor already has experience building their brand and systems so they know what policies and procedures work and which ones do not, eliminating that trial-and-error period common to new business owners.
  • Training and Support: Franchises are typically overseen by a large corporation, which offers customer service and ongoing training to keep franchisees updated on the latest best practices.
  • Purchasing power: A recognizable name gives owners the benefit of a collective buying power of the franchise for purchasing inventory and equipment.

What Are the Disadvantages of a Franchise?

Starting any kind of business takes careful consideration and planning. In some cases, an individual may want to provide a service or product that is not on the market yet. Also, many entrepreneurs do not want to be confined to a higher power, so to speak. Here are several issues that may be considered deterrents to owning a franchise:

  • Startup costs: Depending on the industry, the franchise startup costs can be expensive. In many situations, owners will need to secure financing or take out a loan in order to buy their share of the business.
  • Ongoing expenses: The majority of franchisees must pay royalty and/or advertising fees on a regular basis, which means that a percentage of the profits goes to the franchisor.
  • Less flexibility: The day-to-day operations of a franchise business is often dictated by the franchisor, leaving the owner with limited decision-making authority.
  • Contractual limitations: When purchasing a franchise, owners usually sign a contract that locks them in for a designated period of time. It can be complicated and costly to break this agreement.

Contact a Wheaton, IL Business Law Attorney

Owning your own business can be a dream come true. If you are considering starting your own company or buying a franchise in Illinois, it is essential that you consult a legal professional. At Stock, Carlson & Duff LLC, our seasoned DuPage County business lawyers have 40 years of experience. We will provide you with comprehensive and cost-effective strategies to help get your business off the ground. Call our office today at 630-665-2500 to schedule a confidential consultation.

 

Sources:

https://www.ilga.gov/legislation/ilcs/fulltext.asp?DocName=081507050K3

https://www.ilga.gov/legislation/ilcs/fulltext.asp?DocName=081507050K2

https://www.illinoisattorneygeneral.gov/consumers/franchise.html

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