Downsides of Starting a Franchise
Starting a franchise - or buying an existing one - can certainly give you a lot of shortcuts to success. This would be especially true if it is a well known chain. In spite of the strong positive side, however, there are also some things that you will need to think about before you launch out with your new franchise.
Here are a few of them:
Franchise Opportunities Can Be Costly
One of the major considerations in getting a franchise is the cost. This comes in several forms. There will be the initial large cost, which can be many thousands of dollars - depending on the business. Then, you may also have royalties that need to be paid. In addition, some franchise companies will also expect a share of the profits, too. Each one of these costs will have to be considered and understood, as well as knowing what profit you will need to break even and still be able to make a living.
Control Could Be a Serious Concern
How much control you will actually have over the business is another potentially major concern. Some franchise companies have very few requirements, while other ones will have many. You will need to understand what is required in advance and what your limitations are. Obviously, if you have a lot of plans and want to implement new things, then you will want to seriously evaluate whether or not you can live with the control that will be over you and your franchise. In most cases, it will continue for many years.
Even the pricing of the products in your store may be fixed by the company. This can be a real problem if your area is hit with economic problems and then you are not able to make any necessary price adjustments. It could mean you will have to stand by and watch potential profits escape right out the window - for a long time.
Other Potential Problem Areas
Here are a few other possible areas of concern:
- The amount of training you can receive.
- Your business could get a bad reputation from other stores.
- Selling your franchise may be difficult because it would need approval.
- Your right to the franchise business could be lost for non-compliance.
- You may have to accept an assigned location.
- Support may be limited or even non-existent once started.
Early Franchise Profit May Be Limited
One more concern is that you may not be able to create the profits that you hope to see. This could be because of a combination of price control by the company and the setting of profit goals.
It is also important to discover if the franchise company is actually running the business themselves or if they are only selling franchises. If they have an actual business, then this is the better situation because it means that they have tested their business principles and products. It also means that they intend to stay in business. On the other hand, though, if they are only selling franchises, then there may not be a successful business model there at all, and you may not receive any help at all once your business is running.