Posted on: 30 January 2015

Becoming a franchisee removes the need to build a brand, establish systems and processes and train staff, which can be appealing. However, it also removes some of the flexibility and autonomy that an outright business owner might enjoy.

The table below shows the advantages and disadvantages of franchising for the franchisee:

The table below shows the advantages and disadvantages of franchising for the franchisee:
Advantages Disadvantages
A successful franchise means that the business model is proven Franchise fees and royalties can be a major expense
Franchisees don’t have to build the brand or set up the systems and processes to run the business efficiently Initial franchise costs can be very high and it can take two or more years to turn a profit
Some of the major banks offer competitive rates for lending to franchisees Franchisees cannot adapt the brand, systems or processes to suit them and niche markets in their area
A degree of independence that you might not achieve as an employee Having to comply with the franchise agreement can restrict growth in some areas
The franchisor may have already sold the product or service to the customer – as the franchisee you may only have to service or supply them If the franchisor crumbles it can take all its franchisees with it, even if they are successful businesses in their own right

Consumers expect and receive certain quality levels because of the adherence to the franchise agreement

When the franchise contract expires all goodwill  goes to the franchisor
Training, procedural, process and managerial support are all ongoing Profit margins can be hampered by franchise fees and levies
Operating under an established brand with a strong reputation makes profile-raising easier Relationships between the franchisee and other businesses they might like to work with may be restricted under the Franchise Agreement, potentially hampering growth

Compare business insurance

Compare quotes online:

Get quotes now

Or for expert advice call:

  

Request a call back

 How do I choose the right franchise business?

Business Guidance

How do I choose the right franchise business?

30 January 2015
does-my-business-suit-the-franchise-model

Business Guidance

Does my business suit the franchise model?

30 January 2015
 How do I choose the right franchise business?

Business Guidance

How do I choose the right franchise business?

30 January 2015

Subscribe to the knowledge centre

Please note that fields marked with asterisk (*) are mandatory.


The information and tools contained in this guide are of a general informational nature and should not be relied upon as being suitable for any specific set of circumstances. We have used reasonable endeavours to ensure the accuracy and completeness of the contents but the information and tools do not constitute professional advice and must not be relied upon as such. To the extent permitted by law, we do not accept responsibility for any loss which may arise from reliance on the information or tools in our Knowledge Centre.