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Buying a Franchise: Pros and Cons of Franchise Partnerships

Franchising

Buying and owning a franchise is a big, life-changing decision. Some choose to take the path alone. Others partner with a friend, spouse, or family member. Still others go in with a silent investor. Each situation comes with its pros and cons, and deciding with whom to start a business with can be just as big a decision as the franchise you buy. Here’s a closer look at each option.

Buying a franchise option #1: Going solo

Pros:

  • You are your own boss. Earl Reed purchased his Doctors Express franchise in Alexandria, Virginia, in 2009 because he wanted to run the show by himself. Kathy Ward worked for corporate America for 20 years, got her MBA at the age of 50 and decided to purchase a MaidPro franchise in Phoenix in 2007. Both love the independence and freedom. “For me there is nothing better than being your own boss,” says Ward.
  • You have more control over your own destiny. “My goal is to go into retirement within the next five to seven years having built an annuity business to help fund the retirement,” says Ward.
  • You have better control overall. “[I’m] able to control finances, income distribution and tax and estate implications,” says Reed.

Cons:

  • Being your own boss means you’ll have to clear lots of hurdles. “For the first two to three years, the business owns you,” says Ward. “Long hours, lots of mistakes, many business plan changes, a good deal of stress worrying if the business will take off, etcetera.”
  • The pressure’s on. “You have very limited backup financially and can lose everything if you can’t make it work,” says Reed. “It’s not for sissies!”
  • Forget about days off and vacation time. “Even though I have managers available, ultimately I need to be on call for emergencies at all times,” says Ward.

Ward’s key advice: “Make sure you have the financial backing in place. I was fortunate that I could rely upon my husband’s income to see us through the first three years. Your startup costs will always be more than you calculate. You have to build in a cushion for the ‘unexpected.’”

Buying a franchise option #2: Partnering with friends and family:

Pros:

  • Together, you make a stronger team. “Each person has different strengths that, when [combined], make a stronger unit,” says Tara Butler, who opened a Gamin’ Ride franchise in Waldorf, Maryland, in 2010 with her friend Charles Oglesby.
  • You’re not alone. “Having a partner allows the security of not being alone and knowing there's a built-in team,” says Butler.
  • You can pool your ideas and your money. Butler and Oglesby both used part of their 401(k)s to purchase the franchise.

Cons:

  • The decisions are not entirely yours to make. “Sometimes, you have to compromise on your ideas, which you wouldn't have to do if there was no partner,” says Butler.
  • Communication becomes vital. “Each person has weaknesses that, if not discussed and worked out, could become problematic,” says Butler.

Butler’s key advice:

  • Make sure a joint venture is a good fit for your personalities.
  • Ensure the friendship and partnership have boundaries; you can't allow personal issues to bleed into the business relationship.
  • Don’t assume a good friendship equates to a good business partnership. You must know you can work with your partner.

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Buying a franchise option #3: Partnering with a silent investor

Pros:

  • You receive help with financing and more. A good silent partner can not only provide financing, but also has the experience to offer advice on the direction in which your franchise should be going.
  • You have more control. “You can run your business as your own without the hassle that a full partner might involve,” says Jarrett Estes, who was able to acquire seven Great Clips franchises in St. Louis, Missouri, in 2009 thanks to the financial backing of a silent partner.

Cons:

  • Your partner can put you in a delicate position. “[He or she] may want to end the arrangement before you are ready to take over financially,” says Estes.
  • You may still be on your own in business decisions. “[He or she] may not be able to, or may not want to, offer insight or help on day-to-day issues,” says Estes.

Estes’s key advice: “Make sure you have a good working relationship with your silent partner. Communication is very important so that your silent partner knows what to expect [in return] for their investment and how you will meet those expectations.”

Consider partnership pros and cons

Going the franchise route, either alone or with someone by your side, comes with its own pros and cons. Taking the time to consider the different scenarios before you jump in headfirst can save you a lot of headaches down the road.

RELATED: 40 Reasons to Buy a Franchise

About the Author:

Sara Wilson is a freelance writer who specializes in issues related to small businesses. Contact her at wilson.sara@gmail.com.

Profile: Sara Wilson

Sara Wilson