For many, the thought of owning a franchise simply makes them feel secure and believe this is a guaranteed success. They believe that there is barely anything that could be easier and more rewarding than that! The sad fact is that nearly 40% of franchise businesses make no money or at best break even.  Numerous individuals who once considered establishing a start-up decided to start a franchise instead. Although the franchisee certainly reaps the benefits of having the independence of a small business while being backed by a bigger business network, coupled with the fact that he/she often doesn’t need to have business experience.  The problem begins with the fact that all the business decisions and responsibilities are not, and cannot be, guided by the franchisor.

Though there are great advantages to the system put forth by the franchisor.  Franchisees don’t often voluntarily seek to uncover the disadvantages of such an investment. Here we will explore some nuances associated with the purchase of a franchise:

  • The entity – Though you are starting a franchise business you need to get your own council to help you not only review the contract you are about to sign, but also obtain advice on how your structure should be set up as a business, given your personal situation not to mention the fact that you yourself needs to incorporate your own business.
  • Limited to No Creativity – When you enter into a franchise agreement, you are limited with the ability to make your own decisions on your business operations; this is monitored by the franchise agreement which you signed with the franchisor. The code of conduct of the business clearly states the restrictions on every aspect of the operation of your business from your location to your suppliers, from your marketing visuals to your customer service.
  • Marketing – Though marketing material should be supplied and stipulated in the contract, it will be your responsibility to market and advertise for your unit. Your success will depend on it, however big and known the network you joined! This is one of the number one complaints of franchisees nationwide.
  • Bad Performance. Even in the event that you are doing well and your business is flourishing, if a franchisee in your region or adjacent territory is conducting business in a less than desirable fashion or has poor customer relations; it is likely that your business will suffer as a result of association with the franchise and the level of service disseminated by others.
  • If your business and the whole market is doing well, the franchise company will often saturate the market with people just like you making your business reach shorter and effectively limiting how well your business can do in terms of continued growth.
  • Non-renewal. The renewal of your franchisee contract is subject to the decision of your franchisor. It is not systematic that your contract is renewed after the initial term has passed, regardless of the monetary investment which you have made or the loans you may have to repay. It is important to know what your exit strategy will be!

While owning a franchise has great advantages you must be aware that you will also have to make decision for yourself. You need to know where the Franchise system ends and where your business starts!!   At Devoted Enterprises we have over 35 years of combined leadership experience in helping franchise owners be more successful.   We can help you with whatever your challenges are.

Please contact us with any questions or for a free discussion on how we may be able to help your business!