While franchising has many advantages for a new business owner, there are also many challenges that come along with this business arrangement that also need to be considered. There are issues that may arise that are unique to the franchise business model, and can prove to be obstacles in the road to ownership.

First and foremost are issues of costs. I nvest ing in a franchise with greater name recognition, result s in higher expenditures. I n m any cases , t hese costs are greater than starting an independently owned business and are out of financial range for many. In addition to the initial investment, there are also ongoing charges for franchisor support, management service fees, and royalty payments. The level of support and resources that a franchisor provides may vary, and the fees may be overwhelming for a franchisor that does not include these fees in their investment plan. A franchise also comes along with more legalities than an independently owned business, which can additionally increase costs.

Control of the franchise ultimately falls in the franchisor’s court. To ensure uniformity throughout the franchise, the franchisor dictates standards and quality, controls the way the products or services are marketed and sold, and requires standardized operating procedures from the franchisees. Franchisees are required to share financial information, and accept a level of conformity to the franchisor’s business format, and observe territory restrictions. The lack of decision making may be unappealing for some entrepreneurs.

Franchise agreements are set for a limited period of time, typically 15-20 years. There is no contract renewal guarantee, however. If the agreement is renewed, it may not be under the same original sale terms, conditions, or standards. Territory, royalty payments, or other restrictions may be imposed. There is an added possibility that the franchisor may decide not to renew the franchisee’s contract. A franchise agreement may be at risk for termination if the franchisee is to breach the contract in any way, such as failing to observe set sales restrictions, standards, or pay royalties. If the franchisor decides to terminate the franchise arrangement, then the monetary investment for the franchisee may be lost.

Finally, the franchisee may expect more assistance and support from the franchisor than is realistic. The franchisee is ultimately in charge of their success, and shouldn’t look for the corporate office to handle all of their issues. The franchisor may not be able to provide the franchisee’s level of expected market and field support, which may be daunting for an investor lacking business operation experience.

While these are hurdles in the franchise opportunity, when weighed against the advantages, they may not seem significant. Both the pros and cons need to be evaluated thoroughly for each individual investor and franchise business opportunity to determine whether it is the right financial move.