Virtual General Counsel LLC
Virtual General Counsel LLC

Helping Startups And Complex Business Clients
Services Throughout Denver And The Surrounding Areas

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Explore the potential downsides of buying a franchise

| Feb 12, 2020 | Business Formation |

Recently, this blog featured a post discussing why someone might choose to buy a franchise. While the benefits of choosing a franchise are many, it is also wise for those looking into business formation to learn about the possible disadvantages of owning a franchise. First, a very brief outline of some advantages associated with franchise ownership.

  • A franchise offers a proven business model
  • Access to comprehensive training programs
  • You will have instant name and brand recognition
  • Access to advertising and marketing materials
  • Small business loans are more accessible with a franchise

Of course, nothing good ever comes without a few downsides as well. Learning about the cons of particular models is always a good idea when you are entering into business formation activities. The disadvantages most often associated with buying and operating a franchise include the following.

  • The initial startup costs of owning a franchise can reach hundreds of thousands of dollars
  • Even though you own the franchise, you must still adhere to the franchise’s rules and regulations
  • In most cases, owning a franchise means you must enter into strict business contracts and agreements
  • You will likely have to pay royalties on your franchise
  • You could be vulnerable to financial loss and reputation damage if the brand itself ever suffers a scandal

As with all new endeavors, careful planning and preparation during your business formation efforts can help you achieve your goals. Working with a law firm that has a good track record in Colorado-based business and commercial law can also improve your odds of operating a successful new franchise. An additional benefit of having an attorney on your side from the beginning is helping you overcome any legal problems that may stand in your way.