Some (Potential) Disadvantages of Franchise Ownership
Loss of autonomy. Beware of the advertising hype in many entrepreneurial
publications, with franchise recruitment headlines like“Entrepreneurs
Wanted!” “Imagine the freedom! Imagine the opportunity!” and “Promote
yourself to President!”
The BYOB! (Be your own boss!) marketing myth.
Many franchise salespersons attract prospects with the promise of
freeing them from oppression and giving them the chance to gain control
of their lives. There’s only one problem: Franchise systems are built
on adherence, not independence. Franchisors want implementers, not
rebels. They often recruit individuals who are yearning to break free
from their harness, but as soon as the contract is signed the
franchisor expects them to docilely slip into their harness.
Requiring conformity, adherence to an established system and a
shared identity is not a bad thing. That’s what gives franchising its
power. But you should know that when you sign a ,
you are giving up your right to call all of your own shots. There will
be times when you must comply with rules or procedures you don’t agree
with. There will be times when you will have to adhere to procedures
that may not be in your best interest. And you have to be OK with that.
In the end, you must be confident that the franchisor will lead in such
a way that is in your overall best interest, and be ready to be a
positive team player even when it’s difficult to do so. Be sure the
benefits you’re gaining are worth the loss of freedom.
You could fail. Of course, you could fail with an
independent business as well, but it bears pointing out. Buying a
franchise is not a ticket to success. You have more tools, more
guidance, and better blueprints, but it’s still up to you to build the
Your franchisor could go out of business. While
it’s not common for the franchisor company to go out of business,
leaving profitable franchisees in the lurch, it’s not unheard of
either. Some years ago, the Italian Oven chain’s franchisor declared
bankruptcy, leaving the franchisees to fend for themselves. Some still
operate as independent restauranteurs. In February, 2004, American
Hospitality Concepts Inc., the parent company of the Ground Round Grill
& Bar restaurant chain, filed for Chapter 11 protection in U.S.
Bankruptcy Court in Boston, an action stemming from the sudden
termination of financing by senior lenders. The franchisees rallied
together and saved the chain, but not without much consternation.
Your franchisor company could be sold. Many Ben
& Jerry’s franchise owners were drawn to the concept by the
leadership style and social business consciousness of the chain’s
namesake founders. Many felt betrayed when the company was acquired by
multinational corporation Unilever. Be sure that the benefits that drew you to your opportunity can survive a change of ownership.
Negative publicity/shared tragedy. When foodborne
illnesses struck Chi-Chi’s in Pennsylvania, every Chi-Chi’s unit was
negatively affected. Tragic shootings at one Brown’s Chicken location
cast a pall over every location. The flipside of positive name
recognition is that your identity is tied to the rest of the chain in
negative circumstances also.
Payment of fees. In addition to the initial
franchise fee, franchisees must pay ongoing royalties and advertising
fees. You must pay these fees whether or not you are profitable. For
this reason, you should be confident that the benefits you are gaining
will more than offset this additional cost. In many cases, they do.
Sean Kelly is a 20 year veteran of the franchise industry, and founder of the
award-winning marketing firm IdeaFarm. In 2006, he founded the FranBest franchise network, best franchise opportunities, the top new franchises, franchise marketing, franchise public relations and small business marketing. Contact
him at seankelly[at]ideafarm.net.