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Disadvantages of Buying a Franchise

When it comes to the search for your own financial freedom, the franchise is most likely the better option.

There are however, still certain disadvantages that come with managing this type of business.

The franchise market is huge and there are already several existing franchises to choose from and the numbers are still growing. Even if entering the franchise market may seem as the most supportive option for interested entrepreneurs it also comes with its fare share of disadvantages.

One disadvantage of the franchising system is the initial cost. Because the franchise takes care of all the initial needs of the company to bring it into its infancy, the prices of the initial franchise fee will be big and even bigger if you plan on applying for one from one of the major franchising chains in the country. With this the fee may not always cover everything you need. There are some franchises that leave the store location and rental of establishment to you, which will be extra funds you will need to dish out. Even once you get to pay the initial price for starting the franchise you will still need to pay ongoing royalty fees for the utilization of the franchise trademark and all its items and equipment. Other fees including advertising fees and marketing fees may also add to the additional expense.
The franchise agreement is engraved in stone after it is signed. Not all franchises are as flexible as you think and most are very strict with their rules and regulation. As part of a franchising chain you will need to abide by them in order to continue running the franchise business, otherwise you may face legal sanctions and be restricted from operations all together. These guidelines may also keep you from expanding your business further, be it through the addition of a new product or service or even just in the marketing and advertising department. If it is not allowed in the agreement then there is really nothing you can do. Better that than risk losing the contract all together. You may however, request through a proposal and discuss it with the franchiser though this will take lots of time and reviewing on their part and you may not always get approved.

One of the biggest risks and disadvantage that comes with the franchising market is the fact that you rely solely on the reputation and the financial capacity of the business. Reputation wise you will be dragged along by whatever reputation the franchise contains, good or bad if you hold the company name you will be liable for everything under its belt. With that is the risk of it going bankrupt or out of business. Once the franchise falls, all the franchise chains its supports will follow suit. There is no guarantee to a successful business even through franchising.

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2 Comments

  • john beginner adviser said on January 3, 2011
    you either take a serious study with an idiot's guide to business book or go into franchising. in a world of blind, a deaf is god.
  • Jongpongmar Walling said on April 30, 2014
    I want to open a Zara Showroom in Nagaland. We all love zara here but we don't have a showroom.

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