Downsides of Owning a Franchise Business

Owning a franchise is an excellent option for entrepreneurs to start a new venture. It is more secure than the idea of starting one’s own business from scratch. While franchise opportunities look good on paper, they might be suitable for some people, and not so for others. Owning a franchise business also has a few downsides, which you should consider before investing. Take a look at a few cons of running a franchise to determine if it’s the right choice for you:

  1. High Set-up Cost

Starting up a franchise can be a costly affair. The prices of equipment, the premises, overheads and marketing supplies add up to a considerable amount, which is tough for many people to arrange. The buying process also includes a one-time franchise fee, marketing and signage expenses, and ongoing royalties which add up to a hefty amount taking much space in your monthly bills. Apart from this, there are minimum net worth and liquid asset requirements that raise the set-up cost as well.

  1. Restrictions

Buying a franchise is facilitated by signing a legal contract with the franchisor. This contract binds you under the brand’s autonomy, meaning you have to follow their rules and operational guidelines to run the business. Such rules commonly include hours of operation, advertisement managing, number of employees, customer services, and vendors. This creates an issue for some people who wish to alter a few things but have to refrain due to the restrictions.

  1. Inability to independently sell the business

If you own a franchise, you usually are not allowed to sell or pass on the franchise owner to just anyone. Any sale or ownership transfer requires the approval of the brand or the franchisor. The franchisor, in such cases, repeats the initial process of background checks and permissions, and the gives the go-ahead for the ownership transfers if everything checks out. This means that the exit plan comes with terms and conditions.

  1. Rules and standards

A franchise is a sort of a semi-independent unit that still has to act according to the regulations set by the franchisor. This is one of the main conditions for all the franchises in existence. This clause is usually non-negotiable, and the franchisees are required to follow the pre-determined regulations and adhere to the franchisors business model manual without any questions. These rules and regulations are kept in place to maintain the uniformity of all the franchises and provide a consistent customer service.

Franchise ownership is a great business venture for many people, but not for all the entrepreneurs. Those who want more control over how to run their business would usually not do well in the industry. Thus, it is always suggested that one should weigh the pros and cons of the franchise agreement and consider all the factors before taking the plunge. Moreover, choosing the right franchise is also of critical importance. One should always keep in mind the sector or the field of business, the size of the franchise and the required investment, required skill sets, and other such factors before finalising a suitable franchise partner.