Disadvantages of a Franchise Business

You might think it’s less risky to buy a franchise business. But if you look at most successful businesses and how franchisors started, they took big risks just so they can do well. So why rely on a proven formula when you can create a business model of your own? Here are reasons why franchise business is a thing of the past; reasons that’ll motivate you to go into a business that’s purely and creatively designed by you.

  • Starting a franchise business can be costly. Buying a franchise, especially one that’s been successful, can be very costly, because franchisors are banking on the idea that if you buy their businesses, you will definitely earn a lot of money. They provide you everything you need from supplies and training.
  • Not all business models sold as franchises are sold because they’re successful. Some companies sell franchises not because their businesses are successful. They sell to earn money out of people who want to earn cash fast.
  • Your franchisor has control over your franchise. Your operations have to follow the pattern given by your franchisor. You cannot adjust your franchise business to your local market’s needs.
  • After the cost of buying a franchise, you still have to pay for other fees to your franchisor. You have to pay a monthly fee for royalties. Apart from royalties, a fraction of your revenue also has to go to your franchisor.
  • The reputation of one franchise can make or break the reputation of the others. If a franchise from a town nearby provides faulty services, your reputation will also get affected.
  • Mother companies don’t always take care of their franchises. Some mother companies leave you to run your franchise on your own after they help you with starting up your franchise business. Their only connection to you will be the fees they’ll get from you.
  • Just because a franchise’s model is believed to be a proven formula, it will sell in your area. It might not be suited to the tastes of the potential market in your franchise location. It might have sold in a nearby town but it isn’t guaranteed to sell in your area.
  • Your franchise’s growth is limited by your franchisor. You cannot add anything to your line of products just to accommodate suggestions given by your customers. You cannot grow on your own. Your franchisor is the only one who can change your product line and business model.
  • Creativity is in. Most start-up businesses, especially internet businesses, have been made by entrepreneurs who allowed themselves to be limited only by their imagination. People these days like to experiment with new things, and the creativity of new businesses attract a lot of customers.
  • More people are going for niche products. A franchise business offers products that have become run-of-the-mill, ordinary. More people are going out of their way to look for businesses that offer products that are unique, that cater to particular niches. People don’t give too much attention on brands anymore. Instead, they are focusing on getting products that are specialized for their particular needs.