Advantages and disadvantages of a franchise

Advantages and disadvantages of a franchise

For many would-be entrepreneurs, franchising is an interesting opportunity as it offers the chance to be your own boss without taking on the significant risk that comes with starting a business from scratch.

A franchise provides an opportunity to buy into an existing, successful business model that has a proven track record, a successful training program, a solid supply chain, and expert technical support.

Franchising offers several advantages for would-be business owners, but like anything, there are also some disadvantages that you should be aware of before embarking on a franchise purchase.


Owning a franchise has several advantages such as:


1. Low failure rate. When you purchase a franchise, you are buying an established concept that has been successful. Statistics show that franchises have a much better chance of success than independent start-up businesses.

2. No prior experience is needed as the training received from the franchisor should ensure the franchisee establishes the skills required to operate the franchise.

3. Star power. Many well-known franchises have national brand-name recognition. Owning a franchise is similar to buying a business with built-in loyal customers.

4. You can benefit from communicating and sharing ideas with, and receiving support from, other franchisees in the network. Relationships with suppliers have already been established.


The disadvantages of owning a franchise must also be considered and include:


1. Creativity Can be LimitedBecause franchises already have a predetermined brand, there are creative limitations for franchisees who are looking to explore, alter, or make additions to their company’s business model or brand.

2. Ongoing costs. Besides the original franchise fee, a percentage of royalties from your franchise’s business revenue will need to be paid to the franchisor each month. The franchisor may also charge additional fees for services provided, such as the cost of advertising.

3. The franchise agreement usually includes restrictions on how you can run the business. You might not be able to make changes to suit your your local market.


As with the other legal forms of business, the advantages and disadvantages of a franchise need to be balanced and considered before starting your new business.



Transworld Business Advisors of Baltimore North

31 Light Street, Suite 400 Baltimore, MD 21202

(410) 995-8686