Franchises are a popular investment opportunity for parents who want a bit more flexibility in their lives but don’t have a business idea of their own. The chance to have a steady income, ongoing support and training from the company itself, as well as a customer base all are things that usually tempt a prospective franchisee to take the financial plunge into owning a franchise.
On the balance of things, franchise opportunities can be very successful ventures, but here are some of the less-desirable things about owning a franchise yo should consider before making an investment:
The royalty fees
Essentially, what royalty fees are, even though they are denoted with such an elegant name as “royalty fees,” are pure profits from the franchise owner’s pocket that he or she is required to pay back to the brand just to be able to own the franchise.
But even though the royalty fee may be only 10% of the profits (this figure may vary), it’s still a big proportion of whatever profits the franchise is making. And many companies ask for an annual fee on top of this, which all adds up.
Lack of support
Even though the whole franchise package may look appealing and chances are that the company itself will try to market and advertise their own franchise opportunities, one of the good things about franchise opportunities that is claimed by companies is the ongoing support for a franchise owner.
Indeed, it can be a good thing to have someone to hold your hand and help you with every step of running the franchise on your own, but some franchisees find that they don’t get as much help and support as they signed up for or envisaged.
It’s still your business
Yes – running a franchise doesn’t mean you can just sit back and enjoy the profits without doing any work. It is still your business, and you still have to do all the normal promoting, networking and accounts etc, that a ‘normal’ business requires.
Once you sign, you’re locked in
Another downside to owning a franchise, though, could possibly be the contract that you’ve locked yourself into. Considering the fact that the average contract length for a franchise store owner is usually 15 to 20 years at the onset it would truly make it difficult to get out of if a franchise owner was having trouble getting the popularity of the franchise store off of the ground in the first place. Furthermore, there may actually be hefty breach of contract fees as well if, in fact, your franchise doesn’t do as well as projected and fails within the first few years!
