An entrepreneur is a person who acts on a fresh idea and makes lost out of it.
Business franchising is thought to be a carefree type of business because the business model, the system of operations, and the consumer following have already been established for the franchisor. This common belief however is not as accurate as what most franchise proprietors have reported. There are If you think franchising a business is a walk in the park, think again. Review the potential disadvantages of franchising and reevaluate if franchising is for you.some franchise disadvantages that future franchisors should take note of prior to investing in a business franchise.
One of the most common disadvantages of franchise ownership is the extremely high cost of investing in a business franchise. Research have shown that the estimated cost of franchises nowadays range from fifty thousand dollars to one hundred thousand dollars. This amount still excludes the cost of the equipment, the rent of the space for the location, the purchase inventory, and the daily operations.
Aside from the initial cost, one of the many franchising disadvantages is having continuous royalty payments. When an individual buys a franchise, he/she actually invests on the brand of the company and what he/she bought are the rights to franchise the brand. Each franchise is then required to pay royalty to the owner of the brand being franchised.
Disadvantages of franchise buying include having a stringent set of rules and having a strict operation manual, which must be carried out as consistently as possible. These definite specifications from the franchise owner hinder personal preference changes of the franchisor in various aspects of the business such as in advertising, pricing, product list, and design of the brand among a few. The franchisor may find the franchise contract stipulations to be too limiting.
Another reported franchising disadvantage is the possibility of facing grave consequences when specific provisions of the franchise agreement are broken or disregarded. The franchise owner may take legal action to end the contract on the basis of blatant disregard of the rules agreed upon. This may cost the franchisor tons of money to defend his/her case.
Having lack of guidance and support is found be another franchise disadvantage. Small franchises do not have much accessibility to available resources and support systems. Because franchising is decentralized, very little guidance and supervision is provided.
Restricted flexibility and stunted growth potential are disadvantages of franchise ownership. All franchises are bound to the limits set the brand owner which leaves very little room for innovation and improvement. Flexibility was the cost of having a secure and proven effective business model.
Since a franchise is a chain of business sharing one brand, one of the worst franchise disadvantages a franchisor can experience is suffering because of another franchisor’s mistake. For example, when a particular franchised restaurant is found to have mice in their kitchen, it is immediately assumed by consumers that all restaurants bearing that franchised brand also have mice in their kitchen. In a franchise, the franchisor is always susceptible to suffering from mistakes of his/her co-franchisors.
The sad disadvantage of franchise ownership is that all triumphs of the franchise are shared but all problems are of the franchise are just the franchisor’s problem. When a franchise is doing well, the victory is shared especially by the owner of the brand as he/she gets part of the profits. When a franchise encounters problems such as staff absence or incompetence, it is just faced by the specific franchisor and not the whole chain much less, the owner of the brand.
Franchising can be a good business especially if an individual is team player who is able to work a network of franchises to his or her advantage not to mention having the benefit of the saved headache of creating your own business model. Just like any business, franchising has its own advantages and disadvantages. Prior to going into a franchising business, do some researching first and check out the things to watch out for when franchising because one might regret the many possible franchise disadvantages that might arise.