Franchising Disadvantages and Advantages
In today’s economy starting a business can be tough. However, an increasingly popular choice is to buy into a franchise. There are many reasons that a person may want to buy into a franchise; a pre-established market, less hassle and you get to be your own boss. There are franchising disadvantages as well.
Unknown to many people, there are many disadvantages of purchasing a franchise and you may soon find yourself regretting your decision. Here are few of the franchising disadvantages:
1. Buying Into a Franchise Can Be Expensive
The initial costs of buying into a franchise can be extremely expensive. Many of the world’s leading franchise like Tim Horton’s, McDonald’s, Wendy’s, Wal-Mart or Jiffy Lube can cost you up to anywhere over one million dollars. This is a huge drawback for someone who really has a passion to get into a franchise. It gets worse with the geographical location of the franchise as well. The bigger the city, the more it will cost you. Opening a Wal-Mart in Toronto will likely be more expensive than opening a in a small town like Stratford Ontario.
2. Unexpected and Hidden Costs.
The fees don’t stop at the initial purchase of the franchise. You are often facing extra legal fees for your franchise. Depending on the guidelines given to you by the head office, you may be required to purchase your products from a certain vendor. If this is the case then you can be losing out on the best prices on the market and more importantly, the quality of the product you are receiving.
In some cases you may be required to pay the company a certain percentage of your total monthly income. However, when you work with a franchise broker, they should be able to forewarn you about such matters. You may also be faced with costs not directly related to the store. For instance, to get support from a city council to approve opening a store, you may have to throw in some money for road repairs within certain vicinity.
3. More Strict Operational Guidelines.
Running and operating a business that is part of a big franchise can be quite the drawback. Unlike running your own business like a boss, you have to follow more strict policies. This can range anywhere from the people you order your products from, to time scheduling and the hours of operation. In some cases even the way you run your business can be affected by the corporate bosses.
4. Exit Difficulty.
When you consider leaving your franchise later down the road, you will face yet another unexpected hassle. Unlike with your own personal business, with a franchise you need to get corporate approval to sell the business to a certain individual. This can delay the process of retiring for months or even years.
Before making a decision to buy into a franchise, consider all angles carefully. Depending on the market you are buying into the cons of owning a franchise could potentially outweigh the positive aspects. It is important that you consult with an experienced franchise broker about what you will be facing. The more you are informed the more prepared you will be.
About The Author
Alam Qureshi is a Certified Business Intermediary (CBI), Certified M&A Professional and Broker of Record at ProClient Brokers Inc., Brokerage. He helps business owners learn how to sell a business so they can get the maximum value for their company. call us 416 364 5550 or CONTACT US to get in touch.
Date modified: 10-21-2019