The Disadvantages of Buying a Franchise

As I am sure you can guess, as with everything else in the world of finance and business, there are as many disadvantages of buying a franchise as there are advantages; particularly if the proven business model is not followed properly.

Little Choice in the Matter

If you buy a franchise where you are providing a product to customers then there is one important thing to consider. 90% of the time you will be unable to change the product you are selling. It is not your product, and not your brand, and you will no doubt be in breach of a contract if you try to change the product in any way at all. You will also be unable to sell alternatives or even stock them in your store. This can begin to feel like you don’t really run your own business in the long run and you may even have to wear the same uniforms as the franchisor, and even have your merchandising and advertising dictated by them. If you are looking to start your own business and use your own ideas and initiative then you certainly do not want to get involved in a franchise; seek a different way in and speak to a business advisor.

When you buy into a franchise you need to read the contract carefully, or at least have a business professional do it for you and prepare a list of questions for them. You may also be restricted to conducting other businesses if you have a franchise. Your reputation as a businessman or women is also on the line when you are representing another company, even if it is your business, and you must keep a squeaky clean business record; this is why if you have a franchise with one company it is very rare that you are enabled the opportunity to conduct other business elsewhere.

Bad Press

Of course this works the other way around too, and if you can damage your franchisor’s reputation, they can also damage yours. If they get bad press and media coverage it will, without a doubt affect your business directly. You need to make provisions for things like this, and remember that even the largest of businesses can cause enormous problems and risk losing everything for you.

Ownership

There are many issues with ownership, and of course we have covered the fact that you do not own the branding, products or services. But there may also be another problem. When you come to sell your business (should you wish to) you may also be restricted to who you sell to. This can be very frustrating and even humiliating when you can’t choose who to sell to. In many cases your franchisor will have to clear your choice before any paperwork can be signed.