Disadvantages of a Franchise Business

disadvantages of a buying a franchiseIn our previous post we looked at the advantages of buying a franchise business.

However, while there are so many advantages of owning a franchise, the darker side of buying a franchise business can not be ignored.

Here are some of the disadvantages of buying a franchise:

1. Massive investment: Buying a franchise mean an enormous amount of investment regarding franchise fee, infrastructure, planning, and operations. However, in the case of independent business, a franchise can plan his business as per his budget.

2. Lack of independence: Buying a franchise does not mean that you own a business independently. You are answerable to your franchisor for all your actions and activities.

3. Restriction for buying products or services: By owning a franchise, the franchisee is restricted to buy goods or services from places of his choice. He has to buy those goods or products from franchisor even at higher rates than others.

No doubt that buying a franchise has its advantages and disadvantages but it can still be a better option as compared to independent business. Also if you gel well with your franchisor and take every possible effort to keep the brand free from dilution, the franchisor can be more than happy to extend his unconditional support to you.

There are some aspects of franchising, however, that you must be aware of before committing yourself.

Among these is the contract and the details of who pays for what, and what your expenses will be. What exactly is your share of advertising costs, for example? What protection do you have over price increases in your raw materials in the future, and what independence do you have in sourcing raw materials?

Are the product prices set in stone? Can you reduce your prices if you are trading in a poorer area and what special offers are you enabled to apply? These and many other questions have to be answered before you sign the dotted line.

However, once you have an agreement, a franchise can be a gold mine if you are permitted to use your business skills and acumen, and advertise locally in your way, both online and offline. Are you permitted to have your own website, and what marketing freedom do you have?

Make sure before you sign any agreement that the terms and conditions are fair and acceptable to you. Most will be fair but be careful of new franchises that have appeared in the current recession in an attempt to fleece you of your hard-earned redundancy money.

Many established franchises will treat you fairly and offer you an excellent opportunity to run your own successful business. The entire point of franchising is that the customer gets the same great service and product from your franchise and all the franchisees by following a proven system. So, you will need to learn the systems and processes that have made the other franchisees successful, as well as lead others as you hire staff. It could be challenging at times, but keep in mind learning a system can be much easier than trying to create one from scratch.