Disadvantages of a Franchise Business

Even if franchises have many advantages to the entrepreneur, involving yourself in the franchise community also comes with several risks and disadvantages.

Initially, one would opt for a franchise when interested in starting his or her own business.

This is because a franchise has an existing and proven business model, the necessary supplies and training, an already established reputation and an existing clientele. Despite these attractive qualities, franchises also possess their own share of risks and disadvantages.

First concerns the cost involved in starting up a franchise. Though the franchise supplies the interested applicant with all the needs to start a business, this is also reason as to why the initial cost is so expensive. Roughly franchise average at around $50,000 and require investments of up to $160,000. On top of that the franchise also has several other fees and ongoing fees such as the advertising and marketing fees, royalty fees and renewal fees to name a few. Additional fees also tend to creep in not only at the initial birth of your franchise but also along the way of operations.

There are times however, when franchises offer such bargains with their finances that it seems too good to be true. This is where the potential risk factors settle in. The lower the overhead costs of the franchise the more likely it is not well known and not of essential popularity. With these kinds of businesses it will be difficult to measure the success of your company if you apply for franchise. As much as possible it is beneficial to an entrepreneur if the franchise he or she owns is one with a high existing reputation and credible one at that. It is because of this that interested applicants should do a thorough investigation and research on the history of the franchise they feel interested in, before purchasing it.

Another disadvantage is the issue of control Franchises follow what the main company have to say in terms of the overall management of the company and business system. Depending on the franchise agreement settled between the franchise owner and the franchisee, the guidelines set in the franchise agreement are strict and usually set in stone. This is to keep uniformity within the branches. This serves as a disadvantage since at times, the managers of a particular branch may want to implement certain changes in management and operations, which will almost always need to be subject for approval before they can be implemented. Though there is the possibility that these proposals may be put into action, the process takes time and may not be approved for several months. This also aids in the fact that there is limited growth potential for franchise owners. This is because there is only little you can do to expand your franchise since you are only entitled to the utilization of the brand and trademark, but not necessarily given the privilege to change certain aspects of it to your own liking.


    (All the above fields are required.)


    Popular Articles

    Join Our Newsletter