Are you interested in learning more about the pros and cons of owning a franchise?
At Jack in the Box, we’ve seen how franchising has many advantages and disadvantages from the perspective of our franchisees.
In this article, we’ll look at ten pros and cons you should be aware of before you purchase a franchise.
Pro 1) Proven Business Model
When you purchase a franchise, you’re given access to a proven business model that has stood the test of time in the real-world marketplace.
At Jack in the Box, our established business model (founded in 1951) has been tested and refined for more than 70 years.
Our strong reputation for thinking outside the box when it comes to fast-food has developed a loyal customer base throughout the United States.
Pro 2) Brand Recognition
One of the main reasons a new business will fail is because of their lack of brand awareness. In today’s busy world, starting a brand from scratch can be difficult for entrepreneurs.
However, when you buy a franchise, you’re tapping into a built-in customer base with instant brand recognition from the moment your doors open.
This will help you overcome the challenges of educating the market about your brand and allows you to focus on improving other aspects of the business.
Pro 3) Support & Training
When you franchise with a legacy brand, you’ll receive in-depth training and support before and after your store opens.
Jack in the Box offers a comprehensive training program along with on-going training and support from our Restaurant Support Center.
Through a combination of computer-based and on-the-job training, you or your designated market operator will receive training on topics like:
- Point-of-Sale System
- Ordering & Inventory Tracking
- Marketing & Advertising
- Information Technology
- Setting & Achieving Growth Goals
By the time your training is complete, you should feel confident about operating your new Jack in the Box restaurant.
Pro 4) Marketing Support
Franchisors are able to pool our marketing efforts to provide national and local campaigns to drive customers to your locations.
Jack in the Box uses an unapologetically bold strategy to advertise, market, and promote our more than 2,100 restaurants.
We take an omnichannel approach to reach customers and create brand awareness with:
- Custom Marketing Plans
- Local Marketing Initiatives
- Interactive Marketing Website
- Digital Marketing
- Social Media
- Athletic Sponsorships
- Radio Advertisements
Plus, our mobile ordering app streamlines the food delivery experience for your customers to help you build a following of loyal fans.
Pro 5) Real Estate & Construction
Finding the perfect location along with someone to build it can make the process of starting your own business very difficult in the beginning.
Our team of real estate professionals at Jack in the Box will help you review potential trade areas and sites. We’ll also give you access to our:
- Dedicated Real Estate Team
- Established Broker Relationships
- Sample Leases
- Sample Purchase Documents
- Real Estate Planning Software
Once you’ve found your location, our construction team will work with you to begin the process.
We will assist you with site layouts, selecting an architect, zoning, permitting, general contracting, reviewing bids, and ordering store décor/signage.
Pro 6) Access to Resources
Another benefit a franchisee can take advantage of is the massive purchasing power and economies of scale from their franchisor.
Having access to these types of resources can lead to lower expenses for supplies, equipment, and other items you’ll need to run your business.
If you were working with a supplier as a single small business, they might be less inclined to give bulk order discounts and other perks.
Pro 7) Multi-Unit Expansion Opportunities
Once you’ve experienced the success of owning one or two franchise locations, expanding your business is quick and easy with franchising.
At Jack in the Box, most of our franchise owners are multi-unit operators. As a matter of fact, our average franchisee owns more than 15 restaurants.
Many of them started their journey with Jack in the Box by working in the kitchen, serving customers, and managing operations.
Plus, we incentivize growth in new markets with royalty reductions or interest-free loans to qualifying multi-unit investors.
Con 1) High Level of Investment
The initial investment and start-up costs for a franchisee can be high depending on the brand you’re interested in.
At Jack in the Box, we have three minimum financial requirements all of our franchisees must meet in order to get started.
- Minimum Liquidity: $500,000
- Minimum Net Worth: $1.5MM
- Franchise Fee: $50,000 per Location
As a franchisee with most brands, you’ll also be responsible for paying ongoing royalty fees. Our royalties at Jack in the Box are:
- 5% Royalty of Gross Sales
- 5% Marketing Fee of Gross Sales
These royalties ensure you have the best possible resources to run your business and bring customers to your location.
To get an idea of how much money you’ll need to invest - the estimated initial investment for a Jack in the Box Franchise is $1,765,500 - $2,761,600 excluding land, financing, and certain other costs.
We provide a breakdown of this number in Item 7 found in our Franchise Disclosure Document. Please contact our team to receive a copy of our latest FDD.
Con 2) Limited Creative Control
Individual business owners typically have full creative control over every aspect of their business including the logo, marketing, store hours, etc.
Franchisees are required to follow the guidelines and standards put in place by the franchisor. These rules protect the image of the brand and create synergy between each location.
If you’re interested in having complete freedom in the creative aspects of your business, then franchising may not be right for you.
Con 3) Franchise Agreement Termination
Franchising is a lot like having a driver’s license. It comes with many advantages. However, your license can be taken away if you don’t follow the rules.
Some reasons for termination of your franchise agreement include:
- Failure to pay fees.
- Selling unapproved products.
- Not meeting food safety standards.
You can learn more about renewal, termination, and transfer of your franchise agreement in Item 17 of our Franchise Disclosure Document.
Check Out These Additional Resources
We hope this article gave you a better understanding of the pros and cons of owning a franchise.
At Jack in the Box, we work with our franchisees every step of the way in order to get their restaurants up and running.
Here are some additional online resources you may like to check out:
If you have any questions, please contact our franchise sales and support team.