The Pros and Cons of Buying a Franchise, Part 2: Franchise Cons

franchise cons, cons, franchisee, naperville business law attorneyPurchasing and running a location of an existing franchised company is a common choice for those looking to go into business for themselves, but who are hesitant to start completely from scratch. Of course, any decision to buy or start a business should be well thought-out and thoroughly planned, to avoid unpleasant surprises and unexpected hardships. There are many franchise pros and franchise cons, and it is important to consider both.

Part 2: Franchise Cons

In my practice as a business law attorney, I regularly assist prospective franchisees as they explore their various options, and I welcome the opportunity to do the same for you. Previously, I discussed some of the advantages of buying into an existing franchise, and now I would like to address a number of potential disadvantages to consider.

Little Room for Originality

Are you the type of business owner who thrives on finding new ways to improve your company’s practices? If you are a creative person who is constantly thinking of unique ideas, there will probably be little room to implement them as a franchisee. By choosing to be affiliated with a particular brand, you will be expected, in most aspects, to conform to the parent company’s established model, and while tweaks to the system may be somewhat tolerated, major deviations are not likely to be acceptable.

Oppressive Royalties and Franchise Costs

In exchange for the rights to operate under a recognized name and a proven business system, your franchise contract will include some type of royalty structure or fees to be paid to the parent company. These are most often calculated as a percentage of your total revenues, but may also include a flat yearly or monthly amount. If your royalties are a larger percentage of your income, you may struggle for some time to generate enough cash flow to be truly profitable.

Other, Irresponsible Franchise Owners

When you build your own company from the ground up, your image will be based on your own values and interactions with customers. As a franchisee, your business reputation can be directly impacted by the actions or negligence of other owners within the same franchise. For example, if another location across town of the same franchised company struggles with staffing or, worse, the owner gets into legal trouble, your location may be seen as guilty by association. While customers may have some concept that each location is separately-owned, being united under the same brand as owners with questionable practices can directly impact your success.

Have a Clear Understanding

There are, as you might expect, a large number of other concerns that could impact your decision to become a franchise owner. The team at the Gierach Law Firm is prepared to offer the guidance you need so that you can be sure that a franchise opportunity is right for you. Contact an experienced Naperville business law attorney today to schedule a consultation.

 

Sources:

Entrepreneur

National Federation of Independent Business

Small Business Trends