Franchises are all around us. Everywhere we look. Thousands of brand-name restaurants, gas stations, muffler shops, and coffee shops operate as franchises. And hundreds of thousands of business owners in North America are making money by running someone else's business model. Is this a business paradise, or an unnecessary drag?

What does a franchise give potential owners? Well, for starter's, you get a brand name. Everyone knows of McDonald's. Everyone knows what to expect when you order a meal there. Most people even know the McDonald's slogan by heart. If I opened a restaurant named Duffy's, noone would know what type of food is served there. Needless to say, opening traffic at my restaurant would be significantly less than at McDonald's...

You also get an established business system. Some franchises provide training to owners. Some provide the products to sell. And some provide everything, from the real estate to the equipment to the start-up financing. In short, these are often turn-key operations.

But there is obviously some trade-offs. The first one you'll likely encounter is the up-front cost. Franchises can cost as much as $500,000. Businesses need all the start-up capital they can get, and paying a franchise fee takes away money that could be used to keep the business running. There are also sometimes ongoing license fees, which can cut into profits as well.

There may also be restrictions on the products you purchase and sell. So for example, you might be able to get a great deal on coffee, but your franchise agreement requires you to buy all your foods from the head office at a higher price. There are many things like that outside of your control.

Since you are subject to the rules and restrictions of the head office, who is really in control of your business? Are you your own boss, or are you really just the “manager” of the franchise with a profit-sharing plan?

Of course, not all franchises are that restrictive. Some simply let you use their brand for a fee. And some fees are quite low. Ultimately, whether a franchise makes sense is up to you. Find out the details and run the numbers. Franchisors are supposed to be there to help you get your business up and running successfully... after all, they have a vested interest in your success as well. You may be running your own business for the first time, but the franchisor has (presumably) done it many times before.