The Pros and Cons of Owning A Retail Franchise

The retail sector of franchising is huge.

According to a recent report* from Franchise Direct, the retail franchise sector brings in nearly $70 billion dollars per year, while directly employing over 815, 000 people.

In addition, financial output from retail franchise businesses is expected to grow 5.5% in 2017.

But owning a retail franchise-like all franchise opportunities, has its pros and cons. This article looks at both.

The Pros of Owning A Retail Franchise

1. You can involve your family in the business.

The first positive thing that comes to mind regarding retail franchise business ownership is the opportunity to involve your family. Retail businesses, by their very nature, make great family businesses.

One reason why; the hours. Retail businesses are open 10 hours or more, Monday through Saturday. (Some retailers are open Sunday’s too!) Employing family members in your business who are working “shifts, ” is a great way to combat the potential burnout that can happen working 10+ hour days in a store with a lot of foot traffic.

2. A variety of choices.

Retail franchises come in all shapes and sizes. That means you have a lot of choices in the type of franchise business you’d like to own and operate. Here are a few examples of what’s available these days:

  • 24-hour fitness centers
  • Dry cleaners
  • Packing and shipping stores
  • Pet lodging
  • Pet supply stores
  • Automobile repair centers
  • Hair salons
  • Spa’s
  • Cellphone stores
  • Clothing

And many more.

3. You can plan for growth.

When it comes to owning a business that you can grow, retail franchises fit the bill quite nicely. As a matter of fact, you can map out a specific growth strategy ahead of time.

In short, you do it by signing what’s called a multi-unit franchise agreement.

This agreement (which is part of your franchise contract) contains language that includes the number of units you agree to open, and a specific time-frame that you’ll have them up and running.

For example, your contract* may state that your second location must be opened no more than 18 months after your first location opens, and that your third location must be opened no more than 18 months after your second location opens etc.

*Every franchise contract is different. Make sure you hire an experienced franchise attorney to go over the details-and to help protect your interests.

The Cons of Retail Franchise Ownership

1. Your fixed costs tend to be on the high side.

Aside from the fact that you’ll need to lease a physical space, you’ll have to have inventory, employees, and insurance for your business.

And if you decide to become the owner of multiple franchise units, your fixed expenses will increase. Hopefully your revenue will more than make up for your increased expenses.

2. Competition from online retailers.

The growth and convenience of shopping for items online has affected retail storefront operators. Basically, retail may never be the same.

For the most part, today’s technology makes it easy to shop and do research online for a myriad of products. Especially mobile technology.

As an example, the term “shop by phone” used to be found in catalogs retailers used to physically mail to our homes. They did that because they wanted to make ordering their products as convenient as possible.

In contrast, those 3 words have taken on an entirely new meaning. These days, we can shop for products “by phone” using pictures and even videos that are located right on our (mobile) phone’s screens.

3. Customers can be fickle.

In retail, you can be a hero one day, and the bad guy the next.

That’s because of the law of retail. The law states that once you’ve figured out what your customers like, they move onto something else. (Right after you upped your inventory based on the thing they liked instead of ordering enough of what they suddenly like now!)

Situations like that tend to frustrate retail franchise store owners on a fairly consistent basis. And they can be costly.

Retail Franchising

All businesses have their pros and cons. There’s no such thing as a perfect franchise business opportunity.

But, retail franchising isn’t going away. People still like to see and touch the products they’re interested in spending their hard-earned money on. The trick is to find retail franchise opportunities in which the founders are always upping their game* for maximum market penetration. Ones that aren’t afraid to try new technology. Things that can help franchisees grow their businesses.

Are you interested in a retail franchise?

*Non-U.S. Government link

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