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Before You Buy a Consulting Franchise

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Franchising is a popular start-up method for everything from restaurants to auto supply stores. The consulting industry is no exception. There are dozens of consulting organizations offering the opportunity to franchise, including companies such as Padgett Business Services, Sandler Sales Institute and Business Advisors International.

Using franchising as a short-cut to getting into the consulting business can be expensive. Then again, investing in a franchise is money well spent if it accelerates you as a potential leader in your market. Consider these factors to decide if franchising is right for you.

Typical Costs Associated with Buying a Franchise

Initial franchise fee: Ranging from several thousand dollars to $100,000 or more, this fee covers the cost of training, manuals and support to a new franchisee. For the buyer, it also buys you the right to operate within a specific, or assigned, geographic territory.

On-going royalty fee: This is a fee which is calculated as a percentage of your sales. It pays for the privilege of using the franchise company’s name and likeness in your business.

Ad fund fee: You may be required to contribute to a community advertising fund to pay for marketing. The fee can be calculated as a percentage of sales or as a flat fee.

Advantages of Joining a Franchise System

Name recognition: Building your name takes time when consulting. An established franchise system offers instant recognition and credibility to your new business.

Proven business model: You gain access to an established business concept with a track record of success and profitability. By helping you avoid potential pitfalls, you should accelerate your firm’s success.

Ongoing support: The money you spend on royalties and ad funds provides continual and guaranteed help.

Proprietary system: A consulting franchise may have established unique or proprietary systems, for a distinct advantage in a competitive market.

Potential Disadvantages of Franchising

Lack of branding: A small or growing franchise that is still struggling to gain brand recognition doesn't offer a market advantage.

Unable to replicate: A franchise struggling to reproduce the success of its original concept, or that haven't allowed people to make money, are red flags.

Limited support: If existing franchisees are not eager to tout the help they’ve been given, it may be time to weigh the possibility of starting your own company.

Not unique: Franchises that don't offer strategies or business models that are different from what you already know may not be worth it.

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