Is Owning A Franchise Worth It In 2025?

Are you considering purchasing a franchise but aren’t sure if it is worth the investment? Franchising is a major undertaking, and while it can definitely be worth your while, there are a number of different factors you’ll need to consider before diving in head first.

In this article, I’ll explore whether or not owning a franchise is worth it. I’ll discuss several pros and cons, give you some of my top tips, and break down exactly how much franchise owners can expect to make. By the end of this post, you should be able to confidently determine if franchise ownership is a good choice for you.

Key Takeaways

Franchises offer a proven business model with established operational procedures, reducing the risks of starting a new business.
Operating under a recognized brand can attract customers more quickly than starting from scratch.
Franchisors typically provide comprehensive training and ongoing support to help franchisees manage operations effectively.
Franchise ownership requires a significant initial investment, including franchise fees, along with ongoing costs like royalties and marketing fees.
Franchisees must adhere to franchisor guidelines, which can limit autonomy in business decisions.
Despite support from the franchisor, franchises are not guaranteed to succeed, and financial losses can still occur.
Whether a franchise is worth the investment depends on individual goals, risk tolerance, and thorough research into the specific opportunity.

Pros of Owning a Franchise

Owning a franchise can be extremely rewarding. This is why there are estimated to be more than 820,000 franchise establishments in the USA (a number that continues to grow each year). Let’s take a look at some of the main benefits of purchasing a franchise.

Immediate Brand Recognition

When you buy into a franchise, you’re taking on an established brand that many of your future customers are already likely familiar with. Building trust with customers is a major hurdle for any business. But, doing this will be much easier for you as a franchise owner, as you will start with brand recognition from day one. This allows you to start your business a few jumps ahead. And, because of this, you can expect to grow at a much faster pace.

Franchising Is Generally a Less Risky Business Model

Starting any business has its risks. However, franchises are statistically less risky than most other business models. For example, 90% of startups fail, a figure that is much higher than that of franchises. While franchisees still face many struggles and risks, around half are still in business after 5 years. A well-organized franchise business can set you up for success and allow you to make a profit faster, reaping the benefits of business ownership without many of the common risks.

Securing Financing Can Be Easier

Funding your own business can be difficult, and you’ll generally need to jump through quite a few hoops to secure a loan. While financing a franchise is not a walk in the park, it can be much more straightforward than a standard business model. There are a couple of ways that you can secure financing for a franchise.

In many cases, the parent company will offer in-house funding options for franchisees, which will make your life a lot easier. If in-house funding isn’t available, your next best bet is a bank loan. Since franchises are considered to be less risky than other business types, it is typically easier for franchisees to secure a bank loan. Make sure to draft up a strong business plan that includes all the ins and outs of how you plan to run and manage the franchise.

Alternatively, you could take out a home equity line of credit (HELOC) to fund your franchise business. The point is that franchisees have a lot of options when it comes to funding their new franchise, and securing financing can be much more simple.

You Can Make Profits Quickly

One of the biggest perks of owning a franchise is that you can generally turn a profit quickly. Don’t expect to be raking in money from day one, but you’ll likely start making profits faster than other business models. With a standard business, it may take up to two years to make a profit. With franchises, many tend to start making a profit in the first year, and for some industries with low start-up costs, you can make a profit much faster with good marketing.

Download the First-Time Franchisee Guide

A clear, step-by-step breakdown to help you decide if franchising is right for you—and how to get started.

Cons of Owning a Franchise

Franchise ownership is not all sunshine and rainbows. As with any type of business, there are bound to be some downsides. Here are some of the main drawbacks of purchasing a franchise.

High Start-Up Costs

While a good percentage of the dirty work has been done for you, there’s still plenty that a new franchise owner does have to do. One of the first things you’ll have to do as a new franchise owner is buy into the established brand. According to the Small Business Association (SBA), the typical franchise fee is between $20,000-$50,000.

However, it’s worth noting that this amount will increase when it comes to taking on what’s known as a master franchise agreement. A master franchise agreement essentially gives you the right to a region, allowing you to open many different franchise locations. Master franchise agreements can range from $100,000 to more than $1 million.

Beyond the franchise fee, you’ll also need to pay for the physical property, franchise insurance, build-out costs, inventory, staffing, and other standard operations. Most franchisees need around $100,000 to $300,000 to get started.

Lack of Control and Creativity

I know better than anyone that being told how to operate your business is not an initially appealing prospect. It’s true that as a franchise owner, you’re technically your own boss, but there are still specific processes and procedures that you need to follow. Especially when compared to other business models, franchise owners have much less creative freedom as the parent company will generally have strict guidelines on how to operate the business. While this won’t be a big deal for most entrepreneurs, it can be a deal breaker for some and is definitely something worth considering.

Ongoing Fees and Expenses

And just when you thought you’d forked out enough for the franchise, you’ll have to start paying the ongoing fees and expenses. When you purchase a franchise, you’ll almost always have to pay a royalty fee, which is a percentage of your revenue that you pay to the franchisor. Royalty fees vary, but they typically range between 4% and 9% and occasionally as high as 12%.

You may also have to pay an ongoing marketing fee, which ranges from 1% to 3% of your monthly revenue. Marketing fees cover national and local marketing campaigns.

The Company’s Overall Brand Reputation Significantly Affects Franchisees

While buying into an established brand can be incredibly beneficial, there’s also a flipside to this. What if the parent company suddenly has a PR crisis? It only takes one incident, one CEO saying something untoward, or one bad press release for things to head south. A significant downside of owning a franchise is that your reputation is inexplicitly tied to that of the parent company. If the reputation of the brand as a whole suffers, so does your individual franchise. At the end of the day, your reputation can only be as good as the name of your franchisor, which is ultimately out of your control.

Want Franchising Insights Straight To Your Inbox?

Sign up for our free email newsletter. It’s a 5-minute read once a week to help you level up on the franchising industry.

Sign Me Up

Tips for Getting the Most Out of a Franchise

When properly planned out and researched, owning a franchise can be extremely fulfilling. That said, as you can see from the pros and cons above, there are many different factors that can affect the overall success of your franchise. Here are some of my top tips for making the most out of your franchise.

Focus On Customer Service

It may sound old-fashioned, but customer service is king, especially when it comes to franchises. Giving your best means that your customers will likely do your marketing for you through word of mouth. According to a recent study by Forbes, 92.4% of consumers use reviews to guide their purchasing decisions. Give each customer who walks through your doors the best service and experience, and they will be much more likely to leave a good review and become return customers.

Scale Up

The scalability of your business is a surefire recipe for success. Even when you are first starting out on your franchise journey, it is crucial to have a plan for how you will continue to grow your business. While I certainly don’t recommend rushing into scaling your franchise, growing your business sustainably is an important part of the franchise system.

So, how do you know when it is time to start scaling your franchise? Ask yourself if you could expand your operations while continuing to deliver the same level of customer service and product quality. If the answer is yes, then go for it! On the other hand, if the answer is no, you should focus on improving your systems before increasing output.

Know Your Unique Selling Point

What makes you stand out from the crowd? Why is your product better than the competitor franchise down the road? What do customers get from you that they don’t get from your competitors? You can cement your unique selling point by undertaking research with your target audience and by comparing your offerings to others in your niche. Analyze your competitors and brainstorm ways you can offer new and improved products and a better customer experience.

Use All Support Offered by the Franchisor

You’ve taken on a franchise because of its many positives, such as franchisor support and established brand reputation. Do not overlook courses, resources, meetings, training sessions, or conferences that your franchisor offers. These elements can help get you off the ground and running from day one.

Analyze and Then Analyze Some More

Franchise ownership is all about testing your local market, adapting, and improving. This involves regularly reviewing your sales data, listening to customer feedback, and identifying market trends. Doing all of this will give you an idea of what is working for your franchise and what isn’t. For instance, if a particular product or service is outperforming others, consider doubling down on promotions for that offering or expanding its availability. On the other hand, if you are getting negative reviews about a specific product, you may want to discontinue it.

Negotiate

It is important for anyone going into business to have solid negotiation skills, and at no time is this more important than when you are preparing to sign the franchise agreement. Read through the franchise disclosure document and franchise agreement thoroughly and ask for clarification on any unclear terms.

How Much Do Franchise Owners Make?

According to a 2023 study by the Franchise Business Review, the average annual income of franchise owners is $102,910.

Interestingly (and pleasingly), the FBR also noted that this income increased after the first two years to $115,688.

However, you shouldn’t take this figure as a promise. The amount of money you earn as a franchisee will vary depending on your industry, the competition in your area, and the reputation of the parent company. While some franchisees can earn impressive six-figure salaries, others will barely make a profit.

Franchising vs. Starting a Business: What’s the Best Option?

Deciding on the best business model to go with ultimately comes down to your personal preferences.

If you are considering purchasing a franchise, you’ve got to be at peace with getting involved in a business that is already established. With that comes many benefits but also some negatives. If you are happy with what could be some inflexible policies, procurement contracts, and brand identity, that’s great. My recommendation? Weigh all the pros and cons and do a SWOT analysis. If you feel confident in your decision, franchising is a great choice for you.

On the other hand, if you value flexibility and creativity in your business goals and don’t want to follow specific rules and corporate policies, I don’t suggest going down the franchise route. As I’ve said, they can be inflexible, and you may feel trapped under the franchise roof.