Disadvantages of Franchising

As with any business arrangement, there are disadvantages to franchising that need to be considered:

  • Costs may be higher than you expect. As well as the initial costs of buying the franchise, you pay continuing management service fees and you may have to agree to buy products from the franchisor.
  • The franchise agreement usually includes restrictions on how you can run the business. You might not be able to make changes to suit your local market.
  • Like all businesses, the franchisor might go out of business.
  • Other franchisees could give the brand a bad reputation, which could impact on your business.
  • You may find it difficult to sell your franchise - you can only sell it to someone approved by the franchisor.
  • All profits (a percentage of sales) are usually shared with the franchisor.