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.